If you sell a property in the UK and make a profit, you will likely owe capital gains tax on property. The rates changed on 30 October 2024, and more changes are coming in April 2025 and April 2026. Understanding the current rates, the reliefs available, and the reporting deadlines is essential for any business owner holding property.

This article covers the 2025/26 tax year. We are ICAEW qualified accountants based in the UK, and we work with limited company directors, sole traders, landlords and partnerships who own property. The rules here apply to individuals. Limited companies pay corporation tax on property gains, not CGT, though we cover that distinction below.

What Is Capital Gains Tax on Property?

Capital gains tax on property applies when you sell (or dispose of) a property for more than you paid for it. The gain is the sale proceeds minus the original cost, minus any allowable costs (estate agent fees, legal fees, stamp duty, and capital improvements).

You do not pay CGT on your main home if you qualify for Private Residence Relief. That relief covers the house you live in, including grounds up to half a hectare (more in some cases). If you have let out part of your home or used it exclusively for business, some or all of the relief may be restricted.

The tax applies to:

  • Residential property (buy-to-let, second homes, inherited property you sell)
  • Commercial property (shops, offices, warehouses, land)
  • Mixed-use property

If you sell shares in a company that owns property, that is a disposal of shares, not property. Different CGT rules apply to share disposals, including Business Asset Disposal Relief (formerly Entrepreneurs' Relief).

Capital Gains Tax Rates on Property for 2025/26

The rates depend on whether the gain is from residential property or non-residential (commercial) property, and which Income Tax band you fall into.

Residential Property CGT Rates

From 30 October 2024, the rates are:

  • 18% for gains that fall within your basic rate Income Tax band (up to £50,270 in 2025/26)
  • 24% for gains that fall within your higher or additional rate bands (above £50,270)

These rates apply to residential property gains only. The old 18% and 28% rates ended on 29 October 2024.

Commercial Property CGT Rates

Commercial property gains are taxed at the same rates from 30 October 2024:

  • 18% basic rate
  • 24% higher rate

Previously, commercial property gains were taxed at 10% (basic rate) and 20% (higher rate). The increase to 18% and 24% brings commercial property in line with residential property rates.

Business Asset Disposal Relief (BADR) Rates

If you sell a business or shares in a trading company, you may qualify for BADR. The lifetime limit is £1 million of gains. The rate is changing:

  • 14% from 6 April 2025 to 5 April 2026
  • 18% from 6 April 2026 onwards

BADR applies to disposals of:

  • A trading business you owned for at least 2 years
  • Shares in a trading company where you held at least 5% and were an employee or director for 2 years
  • Assets you used in your trading business after you ceased trading (within 3 years)

BADR does not apply to residential property held as an investment. It can apply to commercial property if it is part of a trading business disposal.

Worked Example: Selling a Buy-to-Let Property

Sarah is a higher rate taxpayer. She sells a buy-to-let flat in Birmingham's Jewellery Quarter in June 2025. She bought it for £180,000 in 2018 and sells it for £265,000. Allowable costs (legal fees, stamp duty, improvements) total £12,400.

Her gain is £265,000 minus £180,000 minus £12,400 = £72,600. She has used her annual CGT allowance of £3,000 (2025/26). Her taxable gain is £69,600.

As a higher rate taxpayer, the full gain is taxed at 24%. Her CGT bill is £69,600 x 24% = £16,704. She must report and pay this within 60 days of completion using the 60-day CGT property return.

Worked Example: Selling a Commercial Property as a Sole Trader

Tom runs a plumbing business as a sole trader from a workshop in Leeds city centre. He bought the freehold in 2015 for £120,000 and sells it in August 2025 for £210,000. Allowable costs are £8,500.

His gain is £210,000 minus £120,000 minus £8,500 = £81,500. His annual allowance is £3,000. Taxable gain is £78,500.

Tom's total income for 2025/26 is £35,000 (plumbing profits). His basic rate band is £50,270. He has £15,270 of unused basic rate band (£50,270 minus £35,000). So £15,270 of the gain is taxed at 18% = £2,748.60. The remaining £63,230 is taxed at 24% = £15,175.20. Total CGT = £17,923.80.

Tom reports this on his Self Assessment tax return (SA100 with SA103 self-employment pages) by 31 January 2027. He does not need a 60-day return because it is commercial property.

How Limited Companies Are Taxed on Property Gains

Limited companies do not pay capital gains tax on property. Instead, they pay corporation tax on the gain. The corporation tax rate in 2025/26 is:

  • 19% on profits up to £50,000 (small profits rate)
  • 25% on profits above £250,000 (main rate)
  • Marginal relief applies between £50,000 and £250,000

If your company sells a property, the gain is added to its trading profits and taxed at the relevant corporation tax rate. The company does not get an annual CGT allowance (companies do not have a CGT annual exempt amount).

If you then extract the proceeds as dividends, you pay dividend tax personally. The effective tax rate on property gains through a company can be higher than CGT for individuals, depending on your circumstances.

For most owner-managed businesses holding property personally is more tax-efficient than holding it inside a limited company. But there are exceptions, particularly for property development companies where the property is trading stock.

Reporting and Payment Deadlines

Getting the timing right is critical. The rules differ between residential and commercial property.

Residential Property: 60-Day Reporting

If you sell a UK residential property and make a gain, you must report and pay the CGT within 60 days of completion. You use the 60-day CGT property return. This is a separate filing from your Self Assessment tax return. If you also complete a Self Assessment, you must still file the 60-day return on time.

The 60-day deadline runs from the date of completion (not exchange of contracts). Miss it and you face penalties and interest.

Commercial Property: Self Assessment Only

If you sell commercial property, you report the gain on your Self Assessment tax return (SA100 plus the capital gains pages). The deadline is 31 January after the end of the tax year. Payment is due by the same date.

For example, a sale in August 2025 is reported on your 2025/26 tax return, due by 31 January 2027. Payment is due by 31 January 2027.

What Counts as Allowable Costs?

You can deduct certain costs from the sale proceeds to reduce your gain. These include:

  • Purchase price (what you paid)
  • Stamp duty (SDLT) paid on purchase
  • Legal fees for buying and selling
  • Estate agent fees
  • Surveyor and valuation fees
  • Capital improvements (extensions, new roof, rewiring, new kitchen or bathroom)
  • Costs of establishing title or defending your ownership

You cannot deduct routine repairs and maintenance (those are revenue expenses, deductible against income tax instead). You also cannot deduct mortgage interest or other financing costs.

Reliefs That Reduce Capital Gains Tax on Property

Several reliefs can reduce or eliminate your CGT bill. The main ones for property owners are:

Private Residence Relief

Fully exempts your main home from CGT. You also get the final 9 months of ownership as exempt, even if you have moved out. If you have let the property, you may qualify for Lettings Relief (up to £40,000 per owner, or £80,000 for a couple). Lettings Relief is restricted to periods where you also lived in the property.

Business Asset Disposal Relief

As noted above, BADR gives a 14% rate on qualifying gains up to £1 million for disposals from 6 April 2025. It applies to disposals of a trading business or shares in a trading company. Commercial property used in the business can qualify if the business itself is sold.

Hold-Over Relief (Gift Relief)

If you give away a business asset (including commercial property used in a business) or sell it at an undervalue, you can claim hold-over relief. The gain is deferred until the recipient sells the asset. This is common when transferring a business to a family member or into a company.

Roll-Over Relief (Business Asset Replacement)

If you sell a business asset (including commercial property) and reinvest the proceeds into a new business asset within 3 years, you can claim roll-over relief. The gain is deferred until you sell the new asset. This is useful for sole traders and partnerships who move premises.

Incorporation Relief

If you transfer a business (including its property) into a limited company, you can claim incorporation relief. The gain is rolled into the shares you receive, deferring the tax until you sell the shares. This is covered in more detail on our incorporation page.

Common Mistakes Business Owners Make

We see the same errors repeatedly. Here are the ones to avoid:

  • Missing the 60-day deadline on residential property. HMRC penalties start at £100 and escalate quickly.
  • Forgetting the annual allowance. You get £3,000 in 2025/26. Use it or lose it.
  • Not tracking capital improvements. Keep invoices for every extension, new roof, rewiring, new boiler. These reduce your gain.
  • Confusing repairs with improvements. Repainting a room is a repair (deductible against income). Replacing all windows is an improvement (deductible against the gain).
  • Assuming BADR applies to all property. It does not apply to buy-to-let properties held as investments.
  • Not considering the company versus personal ownership question. If you are buying property through a limited company, the tax treatment of gains is different. See our limited company tax blog for more.

Planning Tips for 2025/26

The CGT rates on property are now at their highest level in years. Planning ahead is essential.

  • Use your annual allowance each year. If you have small gains, crystallise them before they build up.
  • Time disposals carefully. If you are a basic rate taxpayer, ensure gains stay within your basic rate band to get the 18% rate.
  • Consider transferring property to a spouse or civil partner. Transfers between spouses are tax-free (no gain or loss). Your spouse can then use their own annual allowance and basic rate band when selling.
  • Claim all reliefs you are entitled to. Roll-over relief, hold-over relief and incorporation relief can defer tax for years.
  • Review your property structure. If you hold commercial property personally but trade through a limited company, you may be missing relief opportunities. Speak to an accountant about the best structure for your situation.

If you are considering selling property in the next 12 months, calculate your potential gain early. The difference between 18% and 24% on a £100,000 gain is £6,000. That is worth planning for.

For more detailed guidance on property disposals and how they interact with your overall tax position, visit our services page or contact us directly. We can run the numbers for your specific situation.