Do I pay capital gains tax on property?
If you sell a property in the UK, you might need to pay capital gains tax (CGT) on the profits you make.
You generally won’t need to pay the tax when selling your main home.
However, you will usually face a CGT bill when selling a buy-to-let property or second home. You may also need to pay CGT if your home is partly used as a business premises, or if you lease out part of your property.
CGT rates on property
Since 30 October 2024, the rates of CGT on property has been the same as on other assets. The rates are different for basic and higher rate taxpayers.
Bear in mind that any capital gains will be added to your other income sources when working out which income tax bracket you’ll fall into for the year, and therefore might push you into a higher bracket.
All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free.
In 2025-26 you can make tax-free capital gains of up to £3,000 – the same as 2024-25.
Couples who jointly own assets can combine this allowance, potentially allowing a gain of £6,000 without paying any tax.
You’re not allowed to carry over any unused CGT allowance into the next tax year – so if you don’t use it, you’ll lose it. However, you can carry over capital losses that have been reported (more on this later).
You can find out more in our guide to capital gains tax rates and allowances.
How much CGT will I pay?
As the name suggests, CGT is only charged on the gains you make (the profit), rather than the full amount you sell the property for.
To work out your gain, you can deduct the amount you originally paid for the property from the sales price.
You can also deduct any legitimate costs involved with buying and selling the property. This includes things like broker fees, stamp duty, and some improvements to the property that were made while you owned it.
You can also offset losses you’ve made when selling other assets. For instance, if you own several properties and make, say, a £50,000 loss when selling one of them, you can use that against the gains you make from another property and therefore reduce your overall CGT bill.
You should claim any losses on your self-assessment tax return, or by calling HMRC. You can claim losses up to four years after they were incurred.
For any taxable gains above the tax-free allowance of £3,000 in 2025-26 (and 2024-25), you’ll pay the CGT property rates.
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When is capital gains tax on property due?
For UK properties that you sell, you must pay the tax owed within 60 days of the completion of the sale or disposal.
You’ll do this by submitting a ‘residential property return’ and making a payment on account.
What can I deduct from my taxable gain?
You’re allowed to deduct certain costs from your gain, if they’re involved with buying and selling the property. These include:
- solicitor and estate agent fees
- stamp duty when buying the property.
Costs involved with improving the property, such as paying for an extension, can also be taken into account when working out your taxable gain.
However, you’re not allowed to deduct costs involved with the upkeep of a property. You’re not allowed to deduct mortgage interest either.
Someone is selling a second home in England in 2025-26 for £220,000 after buying it 10 years ago for £120,000.
Their capital gain is the increase in the property value, which is £100,000.
However, they spent £5,000 on solicitor fees and estate agent fees when selling the property, which reduces their gain to £95,000.
- They have no other CGT gains or losses for the tax year, so they can simply use their £3,000 CGT allowance – reducing the taxable part of their gain to £92,000
- The rate of CGT they’ll pay depends on their other income. In this case, let’s say it’s £25,000
- This means they’d pay 18% basic-rate CGT on £25,270 of their gain (taking them up to the basic-rate income tax threshold of £50,270) – coming in at £4,548.60
- They’d have to pay the higher rate of 24% on the remaining £66,730, which is £16,015.20.
Altogether, the CGT bill would be £20,563.80.
Capital gains tax on your main home
In most cases, you won’t need to pay CGT when selling the property you live in, because you will be entitled to ‘private residence relief’.
You won’t need to pay CGT for the time a property was your main residence, plus the past nine months of ownership (even if you weren’t living in the property during those nine months).
People with a disability, or those who move into a care home, can claim for up to the past 36 months of ownership.
That said, you may have a capital gains tax bill to pay if you:
- develop your home, for example, by converting part of it into flats
- sell part of your garden, and your total plot – including the area you’re selling – is more than half a hectare (1.2 acres)
- use part of your home exclusively for business
- let out all or part of your home – this doesn’t include having a single lodger if you are living in the property, too
- moved out of your property nine months or more ago – to move into a partner’s home, for example
- bought a home for the purpose of renovating it and selling it on.
Which property is my main home?
If you use more than one home, you can nominate which will be tax-free for CGT purposes. It doesn’t have to be the one where you live most of the time.
Generally, it makes sense to nominate the property that you expect to make the largest gain when you come to sell it. You have two years from when you get a new home to make the nomination.
Married couples and civil partners can have only one main home between them, but unmarried couples can each nominate a different home.
Remember, you don’t get tax relief if you bought your home just to sell it and make a gain.
CGT on gifted and inherited homes
Your parents or relatives may want to leave you their home in their will. When they pass away, you’ll inherit the property at its market value at the time of death.
There is no CGT payable on death, but the value of the home will be included in the person’s estate. An estate is defined as being the total of someone’s assets and property, minus any debts and funeral expenses.
Depending on the value of the person’s estate, inheritance tax may be payable on the property.
If you then sell the property without having made it your own home, there could be CGT to pay.
The tax you pay will be based on the property’s value when you sell it, compared with its value on the date of death. If the value has increased, you’ll have made a taxable gain. As with any other property gains, you’re able to deduct any associated selling costs.
If you’re given the home while the owner is still alive and living in it, this is called a ‘gift with reservation’.
Essentially, this means the value of the property will still be included in inheritance tax calculations when the gift giver passes away.
However, it may change things in terms of CGT. If you sell the property, the CGT you owe will be based on the increase in value between the date you were given the property – not the date of their death – and the date you sell it.
This is the case even though there may also be inheritance tax to pay on the home at the time of death.
Example of CGT on inherited homes
These tables explain what would happen if John inherited his father’s home.
The first table explains what would happen if it were gifted on death.
The second table explains what would happen if John was given the home 10 years before his father’s death, and his father continued to live there until he died.
With a taxable gain of £56,000, the rate of CGT depends on the rest of John’s income. He’d have to pay 18% if it made up some of his basic-rate threshold up to £50,270. Anything above that would be charged at the higher rate of 24%.
If John already received other income of more than £50,270, the most CGT he could expect to pay is £14,160 , which is 24% of the full £59,000.
Which other taxes may be due on UK property?
CGT is just one of the taxes that is levied on properties in the UK, charged when you come to sell it.
When you buy a home, you will likely need to pay stamp duty on the purchase price. The amount depends on whether the property is your main home or a second home or buy to let investment.
Residents also need to pay council tax, with the amount depending on the property size, location, and a few other factors.
If you’re letting out a property, you’ll probably need to pay income tax on the rent you receive.
And, if you leave a property to someone after you pass away, inheritance tax may be charged on some of its value.