Capital Gains Tax on Property: UK Landlord Guide 2025/26

If you're selling a buy-to-let or second home, you'll usually owe Capital Gains Tax (CGT) on the profit, and you've only got 60 days to report and pay it.

That short window catches a lot of landlords out. So does the fact that the tax-free allowance is now a fraction of what it used to be.

This guide explains how much CGT you pay on property in 2025/26, how to work out your gain step by step, what you can and can't deduct, and the legitimate ways to bring the bill down. It's written for landlords, second-home owners and property investors selling residential property in England, Wales or Northern Ireland. (Scotland sets some of its own rules, so check separately if your affairs are Scottish.)

What is Capital Gains Tax on property? {#what-is-cgt}

Capital Gains Tax is a tax on the profit (the "gain") you make when you sell or dispose of an asset that has gone up in value. For property, it bites when you sell a rental, a second home or another investment property.

You'll typically face CGT when you:

• sell a buy-to-let property
• sell a second home or holiday home
• sell inherited property for more than it was worth when you inherited it
• give property away (except to a spouse or civil partner)
• transfer property into a trust

You normally don't pay CGT when you sell your only or main home, thanks to Private Residence Relief. That relief can be restricted if, for example, you've let the property out, used part of it exclusively for business, or the grounds are very large. We cover the gov.uk rules on Private Residence Relief in the reduce-your-bill section below.

In practice, the people most affected are landlords: buy a property, let it to tenants, sell years later for a profit, and the gain is taxable. Frozen thresholds, rising property values and a much smaller annual allowance mean more landlords now have a CGT bill than a decade ago.

How much is Capital Gains Tax on property in the UK? {#how-much}

For residential property in 2025/26, CGT is charged at two rates that depend on your Income Tax position:

These rates apply for 2025/26 and 2026/27. The way it works in practice:

• The 18% rate applies to the slice of your gain that falls within your remaining basic-rate band.
• The 24% rate applies to the slice that falls into the higher-rate band.

So even if you're normally a basic-rate taxpayer, a large gain can push the top part of it into the 24% band. You add the taxable gain on top of your taxable income, then tax each slice at the rate for the band it lands in. The worked examples below show exactly how that split works.

CGT rates on residential property have sat at 18% and 24% for some time. From 30 October 2024, the rates on other assets (for example, shares) were aligned to the same 18% and 24%, so residential and non-residential disposals now share those headline rates. The big change for landlords hasn't been the rate, though. It's the allowance.

What is the CGT allowance for property? {#allowance}

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The Annual Exempt Amount is the gain you can make each tax year before any CGT is due. For 2025/26 it's £3,000 per person.

That £3,000 covers all your chargeable gains for the year combined, not just property. If your total gains for the year come to £3,000 or less, you've no CGT to pay.

The allowance has fallen sharply in recent years, which is why more landlords now have a bill. It was £12,300 in 2022/23, then £6,000 in 2023/24, then £3,000 in 2024/25, and it remains £3,000 for 2025/26.

If you own a property jointly with your spouse or civil partner, you each get your own £3,000 allowance, so £6,000 between you. That's one of the simplest ways to reduce a joint bill, covered in the reduce-your-bill section.

When do you pay Capital Gains Tax on property? {#when-pay}

For UK residential property sold on or after 27 October 2021, you must report the disposal and pay any CGT due within 60 days of completion.

A few things to keep straight:

• The 60 days run from the completion date (when ownership transfers), not the exchange date.
• The deadline applies to property that isn't your main home.
• If there's no tax to pay (for example, the whole gain is covered by Private Residence Relief or the allowance), you generally don't need to file the 60-day return, but check your position.

The 60-day rule replaced the old approach, where a gain could sit on your next Self Assessment return up to many months later. The current rule speeds up collection and ties the tax to the transaction.

Illustrative example: counting the 60 days

• 1 March: contracts exchanged
• 15 March: completion (ownership transfers, 60-day clock starts)
• 14 May: report-and-pay deadline (60 days after completion)

Miss that deadline and penalties and interest can follow. We cover those in the penalties section.

How do you calculate CGT on property in three steps? {#calculate}

Working out CGT on property comes down to three steps.

Step 1: work out your gain

Start with the basic profit:

Selling price − purchase price = initial gain

For special cases:

• Inherited property: use the market value at the date you inherited it, not what the deceased originally paid.
• Gifted property: use the market value at the time of the gift.
• Sold to a connected person or at undervalue: HMRC may substitute market value for the actual price.

Step 2: deduct allowable costs

Subtract the costs of buying, selling and improving the property:

Initial gain − allowable costs = chargeable gain

We list exactly what counts in the deductions section.

Step 3: apply the allowance and your rate

Take off your £3,000 allowance, then tax what's left at 18%, 24%, or a mix of both:

Chargeable gain − £3,000 allowance = taxable gain

Taxable gain × your CGT rate (18% and/or 24%) = CGT due

If you'd rather have HMRC's tool do the heavy lifting, their official Capital Gains Tax on UK property service walks you through both the calculation and the report. If you want to sense-check the income side first, our Income Tax calculator and Capital Gains Tax calculator can help.

What costs can you deduct from a property gain? {#deductions}

Allowable costs reduce your gain, so getting them right matters. They fall into three groups.

Acquisition costs (buying):

• solicitor and legal fees
• Stamp Duty Land Tax paid on purchase
• surveyor and valuation fees
• estate agent fees on purchase, if any

Disposal costs (selling):

• estate agent fees and commission
• solicitor fees for the sale
• advertising to find a buyer
• the cost of an Energy Performance Certificate

Enhancement costs (improving):

These are capital improvements that add value and are still reflected in the property at sale, such as an extension, a loft conversion, or installing central heating where there was none.

What you can't deduct:

• repairs and general maintenance (decorating, fixing a broken item)
• mortgage interest
• insurance premiums and utility bills
• routine upkeep and servicing

The key test is improvement versus repair. Adding value or extending the property's life is deductible; restoring it to its original condition is not.

Keep receipts and completion statements for at least six years after the relevant tax year. HMRC can ask for evidence, and without it you can lose deductions you were genuinely entitled to.

Worked examples {#examples}

The names and figures below are illustrative only. Use them to see the mechanics, not as a substitute for advice on your own numbers.

Illustrative example 1: basic-rate taxpayer, gain spills into higher rate

Sarah, a sole landlord, sells a rental flat.

Property:

• sold for £250,000 (September 2025)
• bought for £185,000
• initial gain: £65,000

Allowable costs: £24,750 (Stamp Duty £3,500, legal fees £2,500, agent fees £3,750, a £15,000 kitchen extension).

• Initial gain £65,000 − costs £24,750 = chargeable gain £40,250
• Less £3,000 allowance = taxable gain £37,250

Sarah earns £38,000 a year. The higher-rate threshold is £50,270, so her remaining basic-rate band is £50,270 − £38,000 = £12,270.

• £12,270 of the gain at 18% = £2,209
• The remaining £24,980 at 24% = £5,995
• Total CGT: £8,204

Illustrative example 2: higher-rate taxpayer

James, a higher-rate taxpayer earning £75,000, sells an investment property.

• sold for £525,000 (November 2025)
• bought for £288,000
• initial gain: £237,000
• allowable costs £52,125 (Stamp Duty £8,750, legal fees £3,500, agent fees £7,875, a £32,000 loft conversion)

• Initial gain £237,000 − costs £52,125 = chargeable gain £184,875
• Less £3,000 allowance = taxable gain £181,875
• All taxed at 24% = £43,650 CGT

Illustrative example 3: joint ownership

A married couple sell a jointly owned rental.

• sold for £380,000, bought for £250,000, costs £15,000
• chargeable gain: £115,000, split 50/50 = £57,500 each

Each owner:

• £57,500 − £3,000 allowance = £54,500 taxable
• at 24% = £13,080 each, so £26,160 combined

If one spouse had owned it alone: £115,000 − £3,000 = £112,000 at 24% = £26,880. Sharing the gain and using both allowances saves £720 here. The saving is larger where one spouse is a basic-rate taxpayer.

How do you report and pay CGT on UK property? {#report}

Since the 60-day rule came in, reporting is done online through a dedicated service.

Step 1: set up a Capital Gains Tax on UK property account. Start from the report-and-pay service on gov.uk and sign in with your Government Gateway ID. You'll need your National Insurance number.

Step 2: complete the return. You'll enter the property address, purchase and sale dates and prices, allowable costs, your share if jointly owned, any reliefs (such as Private Residence Relief), and the resulting gain and tax.

Step 3: pay within the 60 days. You can pay by debit card, bank transfer, or Faster Payments. Make sure it clears inside the window.

Don't forget Self Assessment. If you already file a Self Assessment return, you still report the disposal there as well, showing the gain, the tax already paid, and any reliefs. That keeps HMRC's records straight and avoids double-counting.

If a 60-day deadline is bearing down on you, our self-assessment service team can prepare and file the CGT return for you.

What are the penalties for paying CGT late? {#penalties}

Miss the 60-day deadline and you can face both a late-filing penalty and a separate late-payment penalty, plus interest on the unpaid tax. HMRC sets out the late-filing penalty rules in its compliance-checks factsheet CC/FS18a.

In broad terms, late filing starts with an initial fixed penalty, with further penalties if the return is months late. Late payment attracts its own penalties that build up the longer the tax goes unpaid, and interest runs from the due date. If you've not just filed late but failed to tell HMRC about a liability at all, separate failure-to-notify penalties can apply, and the percentage depends on whether the failure was careless or deliberate and how you disclose it.

The practical point is simple: the longer you leave it, the more it costs. If you've already missed a deadline, file and pay as soon as you can to stop the clock, and get advice on whether a reasonable-excuse claim is open to you.

How much CGT do you pay on a second home? {#second-home}

A second home or holiday home doesn't qualify for full Private Residence Relief, so you generally pay CGT on the whole gain at the standard 18% and 24% rates, with the £3,000 allowance available.

A property counts as a second home where you own it in addition to your main residence and don't live there as your principal home, for example a holiday place or somewhere kept mainly for personal use.

If you own more than one home, you can nominate which is your main residence for relief, and you normally have two years from when your mix of homes changes to make that nomination. Where a property was genuinely your main home for part of your ownership, you can claim relief for that period, plus the final nine months of ownership, which can cut the bill meaningfully.

Furnished holiday lets used to have their own tax treatment, but that regime was abolished from April 2025, so don't assume old holiday-let reliefs still apply. If your situation is complex, take advice before you sell.

Do non-UK residents pay CGT on UK property? {#non-resident}

Yes. Non-UK residents pay CGT on the disposal of UK residential property at the same 18% and 24% rates, with the same £3,000 allowance and the same 60-day reporting deadline.

There are extra wrinkles. Non-residents report through HMRC's non-resident route, and your home country may also tax the gain. The UK has double-taxation treaties with many countries, so relief is often available to stop the same gain being taxed twice, but you'll need to keep evidence of the UK tax paid. Cross-border cases reward professional advice on both sides.

How can you reduce your CGT bill on property? {#reduce}

There are several legitimate ways to bring a property CGT bill down.

1. Claim Private Residence Relief where it applies. If the property was ever your genuine main home, you get relief for that period plus the final nine months of ownership. On a property owned for 10 years and lived in for 6, you'd get relief for roughly 6 years 9 months out of 10. The gov.uk rules are set out in HMRC's CGT rates and allowances guidance.

2. Use both spouses' allowances. Transfers between spouses and civil partners are on a no gain, no loss basis, so moving a share before sale lets you use two £3,000 allowances, and can shift part of the gain to a basic-rate taxpayer at 18% instead of 24%. The transfer has to be genuine.

3. Time the sale. Spreading two disposals across two tax years uses the £3,000 allowance twice. If your income will be lower next year, the gain may fall into the 18% band.

4. Claim every allowable cost. Keep receipts for improvements, legal fees, agent fees and the Stamp Duty you paid on purchase. Missed costs mean overpaid tax.

5. Offset capital losses. Losses on other assets can be set against your property gain, and unused losses can be carried forward.

What you can't do is invent improvement costs, backdate expenses, sell at an artificial undervalue, or claim a property was your main home when it wasn't. Those are not planning, they're evasion.

For a fuller plan around a sale, including timing and ownership structure, talk to our team via our landlord accounting service and tax advisory service.

Thinking of selling a rental property?

Get the CGT right before you complete, not after the 60-day clock has started. Book a free 20-minute call with a Zmartly accountant and we'll tell you what you're likely to owe and how to file it on time. Talk to us through our landlord accounting page.

Frequently asked questions {#faqs}

How much is Capital Gains Tax on property in the UK?

For 2025/26, CGT on residential property is 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. You add the gain to your income, so a large gain can be taxed partly at 18% (within your remaining basic-rate band) and partly at 24% above £50,270.

What is the CGT allowance for property?

The Annual Exempt Amount is £3,000 per person for 2025/26, covering all your gains for the year combined. Spouses and civil partners who own jointly get £3,000 each, so £6,000 between them.

When do you pay Capital Gains Tax on property?

You must report and pay within 60 days of completion for UK residential property sold on or after 27 October 2021. The clock starts on the completion date, not exchange. The rule applies to property that isn't your main home.

How do you calculate CGT on property?

Work out the gain (sale price minus purchase price), deduct allowable costs such as legal and agent fees, Stamp Duty on purchase and capital improvements, then take off the £3,000 allowance and tax the rest at 18% or 24%, splitting across both rates where the gain crosses £50,270.

What costs can you deduct from a property gain?

You can deduct acquisition costs, disposal costs and capital improvements such as an extension or loft conversion. You can't deduct repairs, maintenance, mortgage interest, insurance or running costs. The test is whether the spend improved the property or merely restored it.

Do you pay CGT if you reinvest in another property?

Yes. There's no rollover relief for buying another residential investment property, so you pay CGT on the first sale regardless of what you do with the proceeds.

Do you pay CGT on inherited property?

You don't pay CGT when you inherit, but you do when you later sell if it has risen in value since you inherited it. Measure the gain from the market value at the date of inheritance. Inheritance Tax is a separate matter for the estate.

What are the penalties for paying CGT late?

Late filing of the 60-day return can trigger an initial fixed penalty with further penalties if it's months late, late payment attracts its own penalties, and interest runs on the unpaid tax from the due date. File and pay as soon as you can to limit the cost.

Can married couples reduce CGT on property?

Yes. Transferring a share to a spouse or civil partner before sale is tax-free and lets you use two £3,000 allowances, and can shift part of the gain to a basic-rate taxpayer at 18% rather than 24%, provided the transfer is genuine.

How much CGT do you pay on a second home?

A second home doesn't get full Private Residence Relief, so you generally pay 18% or 24% on the whole gain, with the £3,000 allowance available. If it was genuinely your main home for part of your ownership, partial relief plus the final nine months may apply.

Do non-UK residents pay CGT on UK property?

Yes, at the same 18% and 24% rates with the same £3,000 allowance and 60-day deadline, reported through HMRC's non-resident route. A double-taxation treaty may give relief if your home country also taxes the gain.