If you sell a residential property that is not your main home, you will pay capital gains tax on the profit. The UK capital gains tax rates for residential property in 2026/27 are 18% for basic rate taxpayers and 24% for higher rate taxpayers. These rates have been in place since 30 October 2024, when the previous 10% and 20% rates were scrapped for property gains.

This article covers the exact rates, the 60-day reporting window, how Business Asset Disposal Relief (BADR) changes from April 2026, and worked examples for different scenarios. If you are selling a second home, a buy-to-let, or a property you inherited, read on.

UK Capital Gains Tax Rates 2026 Residential Property: The Current Rates

For the 2026/27 tax year, the capital gains tax rates on residential property are:

  • Basic rate taxpayers: 18% on residential property gains
  • Higher rate taxpayers: 24% on residential property gains
  • Additional rate taxpayers: 24% on residential property gains

These rates apply to gains above your annual CGT allowance, which is £3,000 for 2025/26 and remains at £3,000 for 2026/27 (as confirmed in the Autumn Budget 2024).

The 18% and 24% rates are specific to residential property. Non-residential assets (shares, business assets, commercial property) still use the old 10% and 20% rates (or 14% and 24% after BADR adjustments).

How Your Income Tax Band Determines Your CGT Rate

Your CGT rate depends on your total taxable income plus your property gain. Here is how it works:

Add your taxable income (salary, dividends, pension, rental profits) to your capital gain. If the total stays within the basic rate band (£50,270 for 2026/27), the gain is taxed at 18%. Any gain that pushes you into the higher rate band is taxed at 24%.

Example: Sarah earns £40,000 in salary. She sells a buy-to-let flat and makes a £30,000 gain. Her total is £70,000. The first £10,270 of the gain (taking her to £50,270) is taxed at 18%. The remaining £19,730 is taxed at 24%.

The 60-Day Reporting Window for Residential Property

When you sell a residential property in the UK, you must report the gain and pay the tax within 60 days of completion. This is not a self-assessment deadline. It is a separate, faster process.

You use the HMRC property disposal calculator or file through your HMRC online account. If you miss the 60-day window, HMRC charges interest and penalties from day 61.

The 60-day rule applies to UK residents selling UK residential property. Non-residents selling UK property also have a 30-day window (different rules apply).

What Counts as Residential Property for CGT Purposes

Residential property means a building used or suitable for use as a dwelling. This includes:

  • Buy-to-let houses and flats
  • Second homes and holiday lets
  • Inherited properties you sell (not your main home)
  • Properties you lived in but later let out (partial relief may apply)

Commercial property, land without buildings, and furnished holiday lettings that meet specific criteria are treated differently for CGT purposes.

Business Asset Disposal Relief (BADR) Changes from April 2026

BADR (formerly Entrepreneurs' Relief) applies to qualifying business assets, including some property disposals. The key change for 2026/27 is the rate increase.

For disposals before 6 April 2025, BADR was 10%. From 6 April 2025 to 5 April 2026, it is 14%. From 6 April 2026, it rises to 18%.

BADR applies to residential property only if it qualifies as a business asset. This typically means:

  • A property used as a furnished holiday letting that meets the qualifying conditions (available for letting 210+ days, actually let 105+ days, and not used significantly by the owner)
  • A property used in a trading business (e.g., a care home, a guesthouse, or a property used for trade purposes)

If your property qualifies for BADR, you get the lower rate on the first £1 million of lifetime gains. Above that, standard residential property rates apply.

Example: James sells a furnished holiday let in the Lake District in July 2026. The gain is £400,000. He has not used any BADR before. The entire gain is taxed at 18% (the BADR rate from April 2026), saving £24,000 compared to the 24% higher rate.

Principal Private Residence Relief: When You Pay No CGT

If you sell your main home, you usually pay no CGT. This is called Principal Private Residence (PPR) relief. The relief covers the entire period you lived in the property, plus the final 9 months of ownership (even if you moved out).

PPR relief does not apply if:

  • The property was never your main home (e.g., a buy-to-let)
  • You let out part of your home (partial relief may apply)
  • You used part of your home exclusively for business (that part may be chargeable)

If you lived in a property for part of the ownership period and let it out for another part, you get partial PPR relief. The gain is apportioned between the exempt period and the chargeable period.

Letting Relief: What Remains

Letting relief used to be more generous. From April 2020, it was restricted to periods where you shared occupation with a tenant. For most landlords selling a former home that was later let out, letting relief is now £40,000 per owner (or the amount of PPR relief, whichever is lower).

This means letting relief is worth checking but often provides limited benefit for standard buy-to-let properties that were never the owner's home.

Worked Examples: UK Capital Gains Tax on Residential Property in 2026/27

Example 1: Basic Rate Taxpayer Selling a Buy-to-Let

Tom is a sole trader earning £35,000 per year. He sells a buy-to-let flat in Manchester's Northern Quarter for £220,000. He bought it for £160,000. Costs of purchase and sale (stamp duty, legal fees, estate agent) total £8,000.

Gain: £220,000 - £160,000 - £8,000 = £52,000
Less annual allowance: £52,000 - £3,000 = £49,000 chargeable gain

Tom's total income plus gain: £35,000 + £49,000 = £84,000. He is a higher rate taxpayer on the portion above £50,270.

First £15,270 of gain (taking him to £50,270): taxed at 18% = £2,748.60
Remaining £33,730: taxed at 24% = £8,095.20
Total CGT: £10,843.80

Example 2: Higher Rate Taxpayer Selling a Second Home

Priya earns £120,000 as a marketing director in London. She sells a second home in Brighton for £350,000, bought for £200,000. Costs total £12,000.

Gain: £350,000 - £200,000 - £12,000 = £138,000
Less annual allowance: £138,000 - £3,000 = £135,000 chargeable gain

Priya is already a higher rate taxpayer. All £135,000 is taxed at 24% = £32,400 CGT.

She must report and pay within 60 days of completion.

Example 3: Furnished Holiday Let Qualifying for BADR

David owns a furnished holiday let in the Lake District. He sells it in September 2026 for £500,000. He bought it for £250,000. Costs total £15,000.

Gain: £500,000 - £250,000 - £15,000 = £235,000
Less annual allowance: £235,000 - £3,000 = £232,000 chargeable gain

David has not used any BADR before. The entire gain qualifies for BADR at 18% (from April 2026).

CGT: £232,000 x 18% = £41,760. Without BADR, it would have been £55,680 at 24%. Saving: £13,920.

How to Reduce Your CGT Bill on Residential Property

Several strategies can reduce the tax you pay. These are legitimate planning options, not avoidance schemes.

  • Use your annual allowance: The £3,000 CGT allowance resets each tax year. If you are selling multiple properties, consider staggering sales across tax years.
  • Transfer to a spouse: Transfers between spouses are tax-free. If your spouse has unused basic rate band or annual allowance, transferring part ownership before sale can reduce the overall tax.
  • Claim all allowable costs: Purchase costs, sale costs, stamp duty, legal fees, estate agent fees, and capital improvements (not repairs) reduce the gain.
  • Check for PPR relief: If you ever lived in the property, you may have partial relief.
  • Consider BADR: If the property qualifies as a furnished holiday let or business asset, BADR may apply.

If you are a limited company director selling a property held in the company, different rules apply. Company property sales are subject to corporation tax (19% to 25%), not CGT. The exit and capital gains section of our blog covers company property sales in detail.

What Happens If You Do Not Report Within 60 Days

Missing the 60-day reporting window triggers interest and penalties. HMRC charges late payment interest from day 61. Penalties start at £100 for the first late return, rising to £10 per day after 3 months, then further penalties for longer delays.

The 60-day window runs from the date of completion (exchange of contracts is not the trigger). If you are unsure about the gain or the costs, report an estimated figure within 60 days and amend later through self-assessment.

When to Speak to an Accountant

If you are selling a residential property that is not your main home, speak to a qualified accountant before completion. The 60-day window is tight. Getting the calculation wrong or missing the deadline can be costly.

Our ICAEW qualified team at Holloway Davies handles property CGT calculations, BADR claims, and 60-day reporting for clients across the UK. We work with landlords, property investors, and business owners selling property assets.

If your sale completes within the next 60 days, contact us immediately so we can prepare the report and payment on time.