Capital Gains Tax on property has become significantly more complex over the past few years, with rate changes, a tightened reporting window, and a reduced annual exempt amount. If you own a rental property or second home and you're thinking about selling, it's important to understand your liability before you complete — because the 60-day reporting clock starts ticking the moment the sale goes through.
The CGT rates for residential property in 2026/27
Capital gains on residential property are taxed at different rates from other assets. For 2026/27, the rates are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. The rate that applies depends on your total taxable income plus the gain in the year — if the gain pushes your total income into the higher-rate band, the portion that sits in the basic-rate band is taxed at 18% and the rest at 24%.
These rates apply to residential property that is not your main home. Your main residence — where you actually live — is protected by Principal Private Residence (PPR) relief, which I'll come to shortly.
The annual exempt amount
Every individual gets an annual Capital Gains Tax exempt amount — a band of gains that are free of CGT each year. For 2026/27, this is £3,000. This is a significant reduction from previous years (it was £12,300 as recently as 2022/23), and it means that many more people now face a CGT bill on property disposals than would have done a few years ago.
The calculation works like this: total gain from the sale (proceeds minus original purchase price and allowable costs) minus the £3,000 annual exempt amount gives the taxable gain. You then apply the relevant rate to reach your CGT bill.
As an example: you bought a buy-to-let property for £180,000 in 2014 and sell it for £290,000 in 2026. The gross gain is £110,000. After the £3,000 annual exempt amount, the taxable gain is £107,000. As a higher-rate taxpayer, CGT at 24% gives a bill of £25,680.
Allowable costs
The gain isn't simply the difference between purchase price and sale price. You can also deduct buying and selling costs — stamp duty paid on purchase, solicitor's fees and estate agent's fees on the sale, and the costs of any capital improvements (not routine maintenance or repairs — those are deducted as expenses against rental income during the period of letting, not against the gain). Keeping records of improvement costs is important and often overlooked by landlords.
The 60-day reporting rule
Since April 2020, UK residents who sell a residential property on which CGT is due must report and pay the tax within 60 days of completion. This is done through HMRC's online "Report and pay CGT on UK property" service — it's separate from your annual Self Assessment return.
The 60-day deadline is strict and catches people out regularly — typically those who assume that, as usual, everything can wait until the January Self Assessment deadline. Missing the 60-day window triggers a £100 late filing penalty immediately, with further daily penalties if the delay continues. The tax itself also accrues interest from the 60-day point.
If the property is jointly owned, each owner must file their own return within 60 days and pay their share of the tax. The return is then also included in your Self Assessment for the year, but the tax is paid earlier.
Principal Private Residence relief
If the property was your main home at any point during your ownership, you may be entitled to PPR relief, which exempts the proportion of the gain that relates to the period of residence. The final nine months of ownership always qualify for PPR relief (even if you've already moved out), as long as the property was your main residence at some point.
For a property that was your home for, say, 10 of the 15 years you owned it, the gain would be apportioned: 10 years as main residence plus 9 months final period (giving 10.75 qualifying years) out of 15 years total. The qualifying proportion of the gain is PPR-exempt, and only the non-qualifying portion is taxable.
What about properties that were let out after being a main home?
Letting relief was scaled back significantly in April 2020. It now only applies where the owner lived in the property at the same time as a tenant — i.e., a lodger situation. The old letting relief for properties that were rented out after the owner moved away no longer applies. This is a significant change for many accidental landlords who turned a former home into a rental property.
Planning ahead
If you're considering selling a rental property, the timing of the sale can make a real difference. Selling in a year when your income is lower (for example, after retirement or in a year you take a career break) means more of the gain may fall in the basic-rate band at 18% rather than 24%. Where a property is jointly owned, both annual exempt amounts are available — £6,000 between two owners — which can also meaningfully reduce the bill.
If you have capital losses from other asset disposals (shares, for example), those losses can be set against property gains in the same year. Loss planning in the year of sale is worth doing with your accountant before you complete.