Capital Gains Tax on Property: A 2026 Guide

If you sell a property that isn't your main home — a second home, a buy-to-let or inherited property — you may owe capital gains tax (CGT) on the profit. The rules changed in recent years, and the reporting deadlines are strict. Here's what you need to know for 2025/26.

What is capital gains tax?

CGT is a tax on the profit (the "gain") you make when you sell an asset that has risen in value. For property, the gain is roughly the sale price minus what you paid for it, minus allowable costs. You're taxed on the gain, not the total sale price.

When does CGT apply to property?

You generally pay CGT on:

• Buy-to-let and rental properties
• Second homes and holiday homes
• Inherited property you later sell (on the gain since you inherited it)
• Property that isn't your only or main residence

Your main home is usually exempt thanks to Private Residence Relief, so most people don't pay CGT when selling the home they live in.

The 2025/26 rates and allowance

Everyone has an annual CGT exempt amount — the first slice of gains you can make tax-free. For 2025/26 this is £3,000, having been reduced sharply in recent years. Above that, residential property gains are taxed at:

What you can deduct

You can reduce your taxable gain by deducting allowable costs, including:

• Stamp duty paid when you bought the property
• Solicitor and estate agent fees on both purchase and sale
• The cost of capital improvements (an extension or new kitchen — but not routine repairs)
• Your annual CGT exempt amount

The 60-day reporting rule

This catches many people out. For UK residential property, you must report the gain and pay the CGT due within 60 days of completion. This is separate from your annual Self Assessment return. Missing the deadline can mean penalties and interest, so plan for it before you complete a sale.

A worked example

You bought a buy-to-let for £200,000 and sell it for £280,000. You spent £5,000 on a loft conversion and £6,000 on combined buying and selling fees.

• Gain: £280,000 − £200,000 = £80,000
• Less improvements and costs: £80,000 − £11,000 = £69,000
• Less annual allowance: £69,000 − £3,000 = £66,000 taxable
• As a higher-rate taxpayer at 24%: roughly £15,840 CGT

Ways to reduce a CGT bill

• Use both partners' allowances: jointly owned property doubles the tax-free amount.
• Time the sale: spreading disposals across tax years uses two annual allowances.
• Keep records of improvements: capital improvements reduce your gain.
• Offset losses: losses on other assets can be set against gains.

Estimate your CGT

CGT on property can run into thousands, so it's worth knowing your liability before you sell. Our capital gains tax calculator handles UK property and other assets, applies the annual allowance, and shows your estimated bill in seconds.

This article is for general information only and does not constitute financial, tax or legal advice. Tax rules and rates can change, and your personal circumstances affect how they apply to you. Always consult a qualified professional before making financial decisions. Figures are based on 2025/26 rates.