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By Introduction
If you sold — or are planning to sell — a rental property or second home in the UK this tax year, Capital Gains Tax (CGT) is probably your biggest concern. With rates adjusted following the Autumn Budget and HMRC’s 60-day reporting window now firmly embedded in law, getting the details wrong can be costly.
This guide walks you through the current CGT rates on residential property, the reliefs you can legitimately claim, and the reporting deadlines you cannot afford to miss.
What Is Capital Gains Tax on Property?
CGT is charged on the profit you make when you dispose of an asset — including selling, gifting, or transferring a property — that has increased in value since you acquired it. The gain is the difference between what you paid (plus allowable costs) and what you received.
Your main home is usually exempt from CGT thanks to Private Residence Relief (PRR). But buy-to-let properties, holiday lets, inherited properties, and second homes are all potentially liable.
Current CGT Rates for Residential Property in 2026
Following changes introduced in the October 2024 Budget, the CGT rates for residential property disposals are now:
- Basic-rate taxpayers: 18% on gains (previously 18%, unchanged for property)
- Higher and additional-rate taxpayers: 24% on gains (reduced from 28% in April 2024, held for 2025/26)
These rates apply after you have used your Annual Exempt Amount (AEA), which stands at £3,000 for 2025/26 — a significant reduction from the £12,300 allowance that existed just a few years ago.
Important: Gains on residential property are taxed separately from other capital gains, and cannot be offset against your income tax bands in the usual sense. Always calculate property gains first, then add them to your income to determine which rate applies.
The 60-Day Reporting Rule — Are You Compliant?
Since October 2021, UK residents who sell a residential property and make a chargeable gain must report it to HMRC and pay an estimate of any CGT due within 60 days of completion. This applies even if you complete a Self Assessment tax return.
Failure to report within the 60-day window triggers automatic penalties from HMRC, starting at £100 and rising the longer you delay. Interest also accrues on any unpaid tax.
Non-UK residents face similar rules but with a 60-day deadline from the date of exchange, not completion — making prompt action even more critical.
Reliefs and Allowances That Can Reduce Your CGT Bill
1. Private Residence Relief (PRR)
If you lived in the property at any point, you may be eligible for partial PRR. The final 9 months of ownership always qualify, even if you have moved out — provided you occupied the property as your main home at some point.
2. Lettings Relief
Lettings Relief is now far more restricted. It only applies if you shared the property with your tenant during your period of ownership. For most landlords who do not live alongside tenants, this relief is no longer available.
3. Allowable Costs
You can deduct from your gain: the original purchase price, solicitor and estate agent fees at purchase and sale, Stamp Duty Land Tax paid on acquisition, and the cost of capital improvements (not repairs or maintenance). Keeping thorough records of every purchase-related cost from day one is essential.
4. Losses from Other Assets
Capital losses from other disposals (shares, other properties) in the same tax year — or carried forward from previous years — can be offset against your property gains.
Common Mistakes Landlords Make
- Failing to register for a Capital Gains Tax on UK Property account before the 60-day window closes
- Confusing repair costs (not allowable) with capital improvement costs (allowable)
- Forgetting to account for the reduced Annual Exempt Amount of £3,000
- Not claiming PRR for the final 9 months on a previously occupied property
- Assuming their accountant has filed the 60-day report — always confirm explicitly
What to Do Before You Sell
If you are considering selling a rental property this year, a little planning ahead of the sale can make a significant difference to your tax bill. Consider timing the sale to maximise use of your Annual Exempt Amount, whether your spouse or civil partner also has unused allowance (transfers between spouses are exempt), and whether there are any carried-forward losses from previous years.
Speaking with a qualified accountant before exchange of contracts — not after completion — gives you the most options.
Next Steps
CGT on property is one of the most complex areas of personal tax in the UK, and the rules continue to evolve. If you have recently sold — or are about to sell — a residential property and are unsure of your obligations, get in touch with our team. We can calculate your liability, identify every relief you are entitled to, and handle your HMRC reporting within the 60-day deadline.
