If you sell a residential property that is not your main home, you almost certainly owe capital gains tax on the profit. The same applies if you sell a buy-to-let, a second home, or land that you developed. The rules changed significantly from 30 October 2024, and further changes to Business Asset Disposal Relief (BADR) take effect from April 2025 and April 2026.
This guide covers everything a UK business owner needs to know about capital gains tax and property for the 2025/26 tax year. We will cover the rates, the reliefs, the reporting deadlines, and the traps that catch people out. We are ICAEW qualified accountants and we see these issues every week with clients across Manchester, Birmingham, Bristol and beyond.
Current Capital Gains Tax Rates on Property (2025/26)
Capital gains tax and property rates split into two categories: residential property and non-residential property (commercial property, land, business assets). The rates changed on 30 October 2024 and are now as follows.
Residential Property Rates
- Basic rate taxpayers: 18%
- Higher rate taxpayers: 24%
These rates apply to gains on selling a residential property that is not your main home. The old 18% and 28% rates applied before 30 October 2024. The 24% higher rate is a 4 percentage point reduction from the old 28% rate, which is a meaningful saving if you sell a property with a large gain.
Non-Residential Property and Business Assets
- Basic rate taxpayers: 18%
- Higher rate taxpayers: 24%
These rates apply to commercial property, land, and business assets (including shares in a limited company that qualifies for BADR, up to the £1M lifetime limit). The old 10% and 20% rates applied before 30 October 2024. The 24% higher rate is a 4 percentage point increase from the old 20% rate.
How to Calculate Your Capital Gain
Calculating your gain is straightforward once you know the components. You take the sale price, deduct the purchase price, and then deduct allowable costs. The result is your chargeable gain. Then you deduct any available reliefs. The remaining gain is taxed at the appropriate rate.
Allowable costs include:
- Stamp duty (SDLT) paid on purchase
- Legal fees for buying and selling
- Estate agent fees
- Surveyor and valuation costs
- Costs of improvements (not repairs). Repairs are day-to-day maintenance and are not allowable for CGT purposes. A new roof or extension is an improvement. Replacing a broken boiler is a repair.
Let us work through a real example.
Example: Sarah, a freelance consultant in Bristol, sells a buy-to-let flat
Sarah bought a flat in Bristol Harbourside in June 2018 for £195,000. She paid SDLT of £5,850 and legal fees of £1,200. In 2022 she replaced the kitchen and bathroom at a cost of £14,500. She sold the flat in March 2025 for £295,000. Estate agent fees were £4,500, legal fees on sale were £1,800.
Calculation:
Sale proceeds: £295,000
Less estate agent fees: (£4,500)
Less legal fees on sale: (£1,800)
Net sale proceeds: £288,700
Purchase price: £195,000
Plus SDLT: £5,850
Plus legal fees on purchase: £1,200
Plus improvement costs: £14,500
Total base cost: £216,550
Chargeable gain: £288,700 - £216,550 = £72,150
Sarah is a higher rate taxpayer. Her CGT bill is £72,150 at 24% = £17,316.
She must report and pay this within 60 days of completion. We will cover that deadline next.
The 60-Day Reporting Rule for UK Property
If you sell a residential property in the UK that is not your main home, you must report the gain to HMRC and pay the tax within 60 days of completion. This is a strict deadline. Miss it and HMRC will charge interest and penalties.
The reporting is done through HMRC's online Capital Gains Tax on UK Property service. You need a Government Gateway ID and the property details. If you do not have a Government Gateway ID, set one up before you exchange contracts.
You report the gain even if you have not yet filed your self assessment return for the year. The 60-day return is a standalone filing. You then include the same gain on your self assessment return (SA100 plus the property pages) later. HMRC will match the two filings and adjust the tax you owe if the 60-day calculation was provisional.
Important: If you are a non-UK resident selling UK property, you have 30 days to report, not 60. This applies to any UK residential property, including your former main home in some cases.
Private Residence Relief: When You Do Not Pay CGT on Your Main Home
Private Residence Relief (PRR) means you do not pay capital gains tax on the sale of your main home. The relief is automatic for the period you lived in the property as your main residence. You nominate which property is your main residence if you own more than one. The nomination must be made within two years of acquiring the second property.
PRR also covers the final 9 months of ownership, even if you have moved out. This is useful if you move to a new home but take time to sell the old one. The final 9 months exemption applies regardless of whether the property was let during that period.
If you let your former main home, you may also qualify for Letting Relief. Letting Relief is capped at £40,000 per owner and applies only if you shared occupancy with the tenant. It was restricted from April 2020 so that it only applies where the owner and tenant shared the property. Most buy-to-let landlords do not qualify for Letting Relief anymore.
Business Asset Disposal Relief (BADR) and Property
BADR (formerly Entrepreneurs' Relief) applies when you sell a business or shares in a trading company. It can also apply to land and buildings used by your business, provided certain conditions are met. The relief reduces the CGT rate on qualifying gains to 14% for disposals from 6 April 2025, rising to 18% from 6 April 2026. The lifetime limit is £1 million.
To qualify for BADR on a property, the property must be:
- Used by your trading business (your limited company or partnership), and
- You must have owned it for at least 2 years before disposal, and
- The business must be trading (not investment or property development).
If you own a commercial property that you rent to your own limited company, that property can qualify for BADR if you sell it as part of a disposal of the business. But if you simply sell the property and continue the business, it may not qualify. The rules are specific and you should take advice before relying on BADR for a property sale.
BADR does not apply to buy-to-let properties or investment properties. Those gains are taxed at the standard residential property rates (18% or 24%).
Capital Gains Tax and Property for Limited Companies
Limited companies do not pay capital gains tax. Instead, they pay corporation tax on chargeable gains. The rates are the same as corporation tax: 19% for profits up to £50,000, 25% for profits above £250,000, with marginal relief between £50,000 and £250,000.
This can make company ownership of property more tax-efficient than personal ownership, especially for higher rate taxpayers. If you hold a buy-to-let portfolio inside a limited company, the gain on sale is taxed at 19% or 25% rather than 24% personally. But you then face a second tax when you extract the proceeds from the company (dividend tax or salary). The overall effective rate depends on your extraction strategy.
For example, if a company sells a property and realises a gain of £100,000, the corporation tax at 19% is £19,000. If the company then distributes the remaining £81,000 as a dividend to a higher rate shareholder, the dividend tax at 33.75% (after the £500 allowance) is roughly £27,135. The total tax is about £46,135, an effective rate of 46%. That is higher than the 24% personal rate. But if you retain the proceeds in the company for reinvestment, the 19% rate is lower than 24%.
The decision depends on your exit strategy and whether you need the cash personally. This is where proper planning matters.
Capital Gains Tax and Property for Sole Traders and Partnerships
Sole traders and partnerships pay capital gains tax on property gains at the same rates as individuals: 18% or 24% for residential property, 18% or 24% for business assets. The same 60-day reporting rule applies to residential property.
If you are a sole trader and sell a commercial property that you used in your trade, you may qualify for BADR if you sell the property as part of a disposal of the whole or part of the business. You also have the £1 million lifetime limit.
Partnerships are transparent for CGT purposes. Each partner reports their share of the gain on their personal self assessment return. The 60-day reporting rule applies individually if the property is residential.
Principal Residence and the 9-Month Final Period
We mentioned the final 9 months exemption earlier. This is one of the most practical reliefs for homeowners who move before selling. If you move out of your main home on 1 January 2025 and sell it on 1 December 2025, the gain for the period from 1 January to 1 October (9 months) is exempt. The gain from 1 October to 1 December is chargeable. That is only 2 months of gain, which is usually small.
If you rented the property out during the final period, the 9 months exemption still applies. This is called the "last 9 months rule" and it applies regardless of what the property was used for during that period.
Reporting and Paying: Practical Steps
Here is the process for reporting a UK residential property sale:
- Complete the sale and receive the completion statement from your solicitor.
- Calculate your gain using the method above. Keep all invoices and receipts for costs.
- Log into HMRC's Capital Gains Tax on UK Property service using your Government Gateway ID.
- Enter the property details, sale proceeds, costs, and reliefs.
- Pay the tax due within 60 days. You can pay by bank transfer (Faster Payments or CHAPS), debit card, or corporate credit card. Personal credit cards are not accepted for CGT payments.
- Include the same gain on your self assessment return (SA100 plus the property pages) when you file for the tax year.
If you are unsure about any part of the calculation, ask your accountant before the 60-day deadline. We have seen HMRC issue penalties for late filing of the 60-day return, even when the gain was small or the relief was obvious. The deadline is strict.
Common Mistakes and Traps
Mistake 1: Forgetting the 60-day deadline. This is the most common error. Clients think they can wait until self assessment. They cannot. The 60-day return is a separate obligation.
Mistake 2: Not deducting all allowable costs. Many people forget SDLT, legal fees, and improvement costs. Keep a file of every receipt from purchase to sale.
Mistake 3: Claiming BADR on a buy-to-let. BADR does not apply to investment properties. Only trading businesses qualify.
Mistake 4: Selling a property that was your main home but you did not nominate it. If you own two properties, you must formally nominate your main residence to HMRC within two years of acquiring the second property. If you do not, HMRC may decide which one is your main home based on the facts, and you may lose the relief.
Mistake 5: Not considering the impact of the annual exempt amount. For 2025/26, the annual CGT exempt amount is £3,000 (down from £6,000 in 2023/24 and £12,300 in 2022/23). If your gain is below £3,000, you pay no CGT. But you still need to report the gain if it is on residential property, because the 60-day reporting rule applies regardless of the exempt amount.
When to Speak to an Accountant
Capital gains tax and property rules are not simple. If any of the following apply to you, take advice before completing the sale:
- You are selling a property that was your main home at some point but not for the whole period of ownership.
- You are selling a property that you let out.
- You are selling a property owned by a limited company.
- You are selling a property that qualifies for BADR.
- You are a non-UK resident selling UK property.
- Your gain is large enough to push you into a higher tax bracket.
- You are selling multiple properties in the same tax year.
As ICAEW qualified accountants, we handle these calculations daily for clients across the UK. If your situation matches any of the above, contact us before you exchange contracts. A few hours of advice can save thousands in tax.
Summary of Key Figures for 2025/26
| Item | Rate or Limit |
|---|---|
| CGT on residential property (basic rate) | 18% |
| CGT on residential property (higher rate) | 24% |
| CGT on business assets (basic rate) | 18% |
| CGT on business assets (higher rate) | 24% |
| BADR rate (from 6 April 2025) | 14% |
| BADR rate (from 6 April 2026) | 18% |
| BADR lifetime limit | £1 million |
| Annual exempt amount | £3,000 |
| Private Residence Relief final period | 9 months |
| Letting Relief maximum | £40,000 per owner |
| 60-day reporting deadline | 60 days from completion |
For more detailed guidance on related topics, see our exit and capital gains blog or our corporation tax blog for company-owned property issues.