Capital Gains Tax on property has changed in the past few years: the rates moved, the reporting window shrank and the annual exempt amount fell. If you're thinking of selling a rental property or second home, work out what you'll owe before you complete. The 60-day reporting clock starts 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 it is £3,000, down from £12,300 as recently as 2022/23. That means many more people now face a CGT bill on property disposals than 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 cost of any capital improvements. Routine maintenance and repairs don't count here. Those are deducted as expenses against rental income while the property is let, not against the gain. Landlords often forget to keep records of improvement costs.
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, which is 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 cut back sharply in April 2020. It now only applies where the owner lived in the property at the same time as a tenant, which in practice means a lodger. The old relief for properties rented out after the owner moved away no longer exists. Many accidental landlords who turned a former home into a rental were hit by this.
Planning ahead
If you're considering selling a rental property, timing matters. Selling in a year when your income is lower (for example, after retirement or during 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 also reduces 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.