If you sell a UK residential property that is not your main home, the capital gains tax (CGT) rates you pay changed on 30 October 2024. The rates are now 18% for basic rate taxpayers and 24% for higher rate taxpayers. These rates apply to the gain you make above your annual exempt amount, not to the full sale price.

This is a significant change from the old rates of 10% and 20% for non-residential assets and 18% and 28% for residential property before 30 October 2024. The government reduced the higher rate from 28% to 24% and kept the basic rate at 18%. If you are selling a buy to let, a second home, or inherited property, you need to know exactly how these rates apply to your situation.

As ICAEW qualified accountants, we work with property investors, landlords, and business owners across the UK who are selling residential property. This guide covers the rates, how to calculate your gain, what reliefs are available, and the strict 60 day reporting deadline for UK residential property sales.

What Are the Current CGT Rates for UK Residential Property?

For disposals of UK residential property made on or after 30 October 2024, the CGT rates are:

  • 18% for gains that fall within your basic rate Income Tax band (after deducting your personal allowance and any other taxable income).
  • 24% for gains that fall within your higher rate or additional rate Income Tax band.

These rates apply to the chargeable gain, not the full sale proceeds. You deduct your allowable costs and your annual exempt amount from the gain before applying the tax rate.

Before 30 October 2024, the residential property rates were 18% (basic rate) and 28% (higher rate). The 28% rate was cut to 24% in the Autumn Budget 2024. The 18% basic rate was unchanged.

For non-residential assets (shares, business assets, commercial property), the rates remain at 10% and 20% for most disposals. Business Asset Disposal Relief (BADR) has its own rates: 14% for disposals from 6 April 2025, rising to 18% from 6 April 2026.

Who Pays CGT on Residential Property?

You pay CGT on residential property if you sell or dispose of a property that is not your main home. The most common examples are:

  • Selling a buy to let property.
  • Selling a second home or holiday home.
  • Selling an inherited property that you did not live in as your main home.
  • Gifting a residential property to someone other than your spouse or civil partner.

If you sell your main home, you typically do not pay CGT because of Private Residence Relief. That relief covers the period you lived in the property as your main home, plus the final 9 months of ownership regardless of occupancy. If you let out part of your main home or used it for business, the relief may be restricted.

Non-UK residents selling UK residential property also pay CGT. The rates are the same 18% and 24%, and the 60 day reporting rule applies to them too.

How to Calculate Your Chargeable Gain

Calculating your gain is straightforward in principle, but the detail matters. Here is the basic formula:

Sale proceeds (net of selling costs) minus purchase price (plus buying costs) minus allowable improvement costs equals chargeable gain.

Then you deduct your annual exempt amount (if available) from the chargeable gain. The remaining gain is taxed at 18% or 24% depending on your total taxable income for the year.

Example: Selling a buy to let in Manchester

Imagine you bought a flat in Manchester's Northern Quarter in 2016 for £180,000. You sell it in March 2026 for £310,000. Your costs are:

  • Purchase price: £180,000
  • Stamp duty at purchase: £1,800
  • Solicitor fees on purchase: £1,200
  • Estate agent fees on sale: £6,200
  • Solicitor fees on sale: £1,500
  • New kitchen and bathroom in 2019: £18,000 (allowable improvement, not repair)

Your total allowable costs: £180,000 + £1,800 + £1,200 + £6,200 + £1,500 + £18,000 = £208,700.

Chargeable gain: £310,000 minus £208,700 = £101,300.

You deduct your annual exempt amount (£3,000 for 2025/26). So taxable gain: £98,300.

Now you need to work out which tax band the gain falls into. Your other taxable income for 2025/26 is £45,000 (salary plus dividends). Your personal allowance is £12,570, so your taxable income is £32,430. The basic rate band is £37,700 (for 2025/26). You have £5,270 of basic rate band remaining (£37,700 minus £32,430).

The first £5,270 of your gain is taxed at 18%: £5,270 x 18% = £948.60.

The remaining £93,030 of your gain is taxed at 24%: £93,030 x 24% = £22,327.20.

Total CGT due: £23,275.80.

This example shows why the 18% rate matters. Even higher rate taxpayers often have some basic rate band available for the first slice of their gain.

Annual Exempt Amount for 2025/26

The annual exempt amount for 2025/26 is £3,000. This is the same as 2024/25. The government reduced it from £6,000 to £3,000 from April 2024, and it has not changed for 2025/26.

You can only deduct one annual exempt amount per tax year, regardless of how many properties you sell. If you sell two buy to lets in the same year, you get one £3,000 allowance between them.

Spouses and civil partners each have their own annual exempt amount. If you own a property jointly with your spouse, you can each use your £3,000 allowance against your share of the gain.

The 60 Day Reporting and Payment Deadline

For UK residential property disposals, you must report the gain and pay the tax within 60 days of completion (the date legal ownership transfers to the buyer). This is a hard deadline. Miss it and HMRC charges interest and penalties.

You report the gain using the 60 day CGT property return on your HMRC online account. You can also use the paper form but the online system is faster and more reliable.

The 60 day return is separate from your annual Self Assessment tax return. Even if you file a full Self Assessment (SA100) by 31 January, you still need to file the 60 day return. HMRC then reconciles the two later.

If you do not pay the CGT within 60 days, HMRC charges interest from the day after the 60 day deadline. Late filing penalties start at £100 and can increase with continued delay.

Exception: If the gain is below the annual exempt amount (£3,000), you do not need to file a 60 day return. But if the proceeds are over £50,000 and the gain is under £3,000, you still may need to file if you have other gains in the year. Check with your accountant.

What Costs Can You Deduct?

You can deduct certain costs from your gain. Keep records of everything. The main categories are:

  • Purchase costs: The price you paid, plus Stamp Duty Land Tax, solicitor fees, survey costs, and estate agent fees from the purchase.
  • Improvement costs: Capital improvements that add value or extend the property. This includes extensions, new kitchens, new bathrooms, new windows, rewiring, new roofs. It does not include repairs or maintenance (redecorating, fixing a leak, replacing a single broken window).
  • Selling costs: Estate agent fees, solicitor fees, and any other costs directly related to the sale.
  • Inheritance Tax: If you inherited the property and paid Inheritance Tax on it, you can deduct the IHT value as part of your cost base. This is complex and you should take advice.

You cannot deduct mortgage interest or other financing costs. Those are revenue expenses, not capital costs.

Private Residence Relief: When You Do Not Pay CGT

If the property was your main home for the entire period you owned it, you get full Private Residence Relief. No CGT is due.

If you lived in the property for part of the time and let it for part of the time, the relief is apportioned. You get relief for the period you lived there, plus the final 9 months of ownership regardless of occupancy.

If you let out part of your main home (e.g. you lived upstairs and rented out the ground floor), Lettings Relief may also apply. Lettings Relief is capped at £40,000 per owner. It was restricted from April 2020 to only apply where you lived in the property at the same time as the tenant.

If you have a garden or grounds of up to 0.5 hectares (about 1.25 acres), they are normally covered by Private Residence Relief. Larger grounds may be taxable.

Other Reliefs and Allowances

Beyond Private Residence Relief, a few other reliefs can reduce your CGT bill on residential property:

  • Spouse or civil partner transfer: Transfers between spouses or civil partners are no gain, no loss. You can transfer ownership to use both annual exempt amounts on a later sale.
  • Gift hold over relief: If you gift a residential property to a trust or to an individual (not your spouse), you can claim hold over relief to defer the gain. The recipient inherits your cost base. This is common for Inheritance Tax planning but needs careful advice.
  • Losses: If you sell another property at a loss in the same tax year, you can offset that loss against your gain. You can also carry forward unused losses from previous years.

For business owners who use part of their home as an office, the position is more nuanced. If you claimed a proportion of your home as business premises for capital allowances or running costs, you may lose some Private Residence Relief on that part. HMRC's guidance on this is strict.

How the Rates Interact with Other Income

The CGT rate you pay depends on your total taxable income for the year. Your gain is stacked on top of your other income to determine which tax band it falls into.

Here is the order HMRC uses:

  1. Your non-savings income (salary, self employment, pension).
  2. Your savings income (bank interest).
  3. Your dividend income.
  4. Your chargeable gains (property gains).

This stacking means your property gain always sits in the top slice of your income. If your salary already uses up the basic rate band, your entire gain is taxed at 24%. If you have room in the basic rate band, the first portion of your gain is taxed at 18%.

If your total income (including gains) pushes you into the higher rate band, you lose some or all of your personal allowance. The personal allowance reduces by £1 for every £2 of income above £100,000. This can affect your effective CGT rate because it changes your taxable income calculation.

Planning to Minimise Your CGT Bill

You cannot avoid CGT entirely on a residential property sale (unless Private Residence Relief applies). But you can plan to reduce the impact:

  • Time the sale: If you are close to retirement or expect lower income in a future tax year, delaying the sale could mean more of your gain is taxed at 18% rather than 24%.
  • Use both allowances: If you own the property jointly with your spouse, you each get a £3,000 annual exempt amount. Transferring ownership before sale (if the property is held in one name) can double your allowance.
  • Claim all allowable costs: Many landlords forget to include purchase costs, improvement costs, and selling costs. Go through your records carefully.
  • Consider an incorporation: If you hold multiple buy to lets, transferring them into a limited company can change the tax treatment. But incorporation triggers CGT on the transfer itself, and the company pays corporation tax on future gains. This is a big decision that needs full modelling.

If you are a business owner considering selling a property held in your company, the tax treatment is different. Companies pay corporation tax on property gains at 19% to 25%, not CGT. The 60 day reporting rule does not apply to companies. But extracting the proceeds from the company triggers further tax (dividends or salary). This is a separate topic covered in our exit and capital gains content.

What About Non-Residents?

Non-UK residents selling UK residential property pay CGT at the same rates: 18% and 24%. The 60 day reporting rule applies to them too. They must report and pay within 60 days of completion.

Non-residents also get an annual exempt amount of £3,000, but only if they are UK resident for tax purposes in the year of disposal. Non-residents who are not UK tax residents do not get the annual exempt amount. Their entire gain is taxable.

If you are a UK resident selling a property abroad, you may also pay UK CGT on that gain. The rates depend on the type of property and whether the gain is residential or non-residential. Foreign property gains are reported on your Self Assessment, not through the 60 day return. You may also get double tax relief if you paid tax in the country where the property is located.

How to Report and Pay

For UK residential property disposals, use the 60 day CGT property return on your HMRC online account. You will need:

  • The date of completion.
  • The sale proceeds and purchase price.
  • Allowable costs (improvements, fees).
  • Details of any reliefs claimed.
  • Your estimate of the gain and the tax due.

HMRC will calculate the tax based on the information you provide. You can pay by bank transfer (Faster Payments, CHAPS, Bacs) or by debit card. You cannot pay by credit card or cash.

If you already file Self Assessment, the 60 day return is separate. HMRC will later reconcile the two. If you overpay on the 60 day return, you get a refund or credit against your Self Assessment bill. If you underpay, you pay the balance by 31 January.

If you are unsure about the calculation, file the 60 day return with your best estimate. It is better to file an estimated return on time than to miss the deadline. You can amend it later.

Common Mistakes to Avoid

We see these mistakes regularly when advising clients on property disposals:

  • Missing the 60 day deadline. This is the most common error. The clock starts from completion, not exchange of contracts. Exchange and completion are often the same day for residential sales, but not always. If they differ, completion is the trigger.
  • Forgetting the annual exempt amount. You deduct £3,000 from your gain before applying the tax rate. Some people calculate tax on the full gain.
  • Claiming repairs as improvements. You can only deduct capital improvements. Repairs and maintenance are not allowable. If you repainted the whole house, that is a repair. If you added an extension, that is an improvement.
  • Ignoring the 60 day return for small gains. If the gain