Capital Gains Tax on UK Property 2026 — Everything You Need to Know

When does CGT apply to property?

Capital Gains Tax arises on the disposal of an asset at a profit. For residential property, disposals that trigger CGT include:

• Selling a rental property or buy-to-let
• Selling a second home
• Selling an inherited property (if it has increased in value since the date of death)
• Gifting a property (at market value — treated as a disposal even if no cash changes hands)
• Selling a property you previously lived in but do not currently occupy as your main home (unless PPR relief covers the full period)

Your main home is generally exempt under Principal Private Residence (PPR) relief — covered in detail below.

CGT rates on residential property — 2026/27

These rates have applied since 31 October 2024 when the Autumn Budget increased the higher rate from 28% to 24%. The basic rate of 18% was unchanged.

Residential property rates are higher than non-residential CGT rates (which are 18%/24% from October 2024 for most assets). Previously there was a larger gap.

The Annual Exempt Amount

For 2026/27, the Annual Exempt Amount (AEA) is £3,000. This is the amount of gains each individual can make each tax year before CGT is due.

The AEA has been significantly reduced from its 2022/23 level of £12,300. The reduction since 2023 alone means many more property sellers are now paying CGT where previously their gain would have been fully sheltered.

Key rules:

• The AEA applies per individual, per tax year — you cannot carry unused AEA to future years
• Married couples/civil partners each have their own £3,000 AEA
• The AEA cannot be used against the same gain twice — but jointly owned property allows each owner to use their AEA against their share of the gain

Calculating your CGT gain

The basic calculation:

Gain = Disposal proceeds - Cost basis - Allowable costs

Disposal proceeds

The amount received from the sale (or market value if gifting). For arm's-length sales, this is the contract price. For gifts or related-party transfers, HMRC uses market value.

Cost basis

The price you paid for the property, including:

• Purchase price
• Stamp Duty Land Tax (SDLT) paid on purchase
• Legal fees on purchase
• Survey costs on purchase

Allowable costs

Additional costs that can be deducted from the gain:

• Legal fees on sale
• Estate agent / selling fees
• Capital improvement costs (extensions, conversions, major renovations — not routine repairs)
• Costs of establishing or defending legal title

Note: Mortgage interest, insurance, and routine maintenance costs are not allowable against CGT — they may be income tax deductions for landlords, but not CGT.

Example calculation

The 60-day reporting rule

Since 6 April 2020, HMRC requires mandatory reporting and payment of CGT within 60 days of completion on UK residential property using the UK Property Reporting Service at gov.uk.

The 60-day clock starts from the completion date (not exchange of contracts).

How to report

1. Register or log in at gov.uk/report-and-pay-capital-gains-tax
2. Enter the property details, sale price, cost basis, and allowable costs
3. Calculate the gain and estimated CGT
4. Pay the CGT online

You will also need to include the gain in your Self Assessment tax return for the relevant year, but the 60-day report must be made first and the tax paid at that point.

Penalties for late reporting

Interest applies on unpaid tax from the day after the 60-day deadline.

Exception: If your gain falls entirely within the Annual Exempt Amount and total proceeds do not exceed £50,000, you do not need to report (though it may still be advisable to report if you have other gains that year).

Principal Private Residence (PPR) relief

PPR relief exempts the gain on your main home from CGT. If you have always lived in the property as your only or main residence, the gain is fully exempt.

How PPR is calculated

PPR relief is apportioned based on the period you lived in the property:

PPR exempt fraction = (Period of qualifying occupation + Final 9 months) / Total ownership period

The final 9 months of ownership are always treated as qualifying, even if you had moved out (for example, into a new home while trying to sell the old one).

Example:

• Own property for 120 months total
• Lived in as main home for 84 months
• Did not live in for final 36 months (it became a rental)
• Final 9 months of the 36-month rental period count as qualifying

Qualifying months = 84 + 9 = 93 PPR fraction = 93/120 = 77.5%

If the gross gain was £100,000, the PPR-exempt portion = £77,500, and only £22,500 is subject to CGT.

Nominated main residence

If you own two properties and live in both (e.g. a city flat and a country house), you can nominate which is your main residence for PPR purposes. The nomination must be made within 2 years of first having two residences. Strategically switching nominations before selling each property can significantly reduce CGT.

Periods of absence that still qualify for PPR

Certain absences from your main home still count as qualifying occupation:

• Up to 3 years of any absence (if you had no other main residence during this time)
• Periods working abroad (any length, if required by your employer)
• Up to 4 years working elsewhere in the UK due to employer relocation

Lettings relief — abolished April 2020

Before April 2020, you could claim lettings relief of up to £40,000 on a property that had been your main home at some point but had also been let out. This relief was abolished for most taxpayers from 6 April 2020.

The only remaining lettings relief is for landlords who share occupancy with their tenant (i.e. the landlord lives in the property alongside the tenant). This is now a very narrow relief.

CGT on inherited property

When you inherit a property, its cost basis for CGT purposes is the probate value — the market value of the property at the date of the deceased's death (as agreed with HMRC for Inheritance Tax purposes).

This is a "stepped-up basis": you do not inherit the deceased's original purchase price. This means:

• The property could have doubled in value since the deceased bought it
• Your CGT is only on the gain from the probate value to your eventual sale price
• If the property falls in value between the date of death and your sale, you may have a CGT loss

Example:

• Property valued at probate at £350,000 (date of death 2023)
• You sell in 2026 for £390,000
• Allowable costs on sale: £8,000
• Gain: £390,000 - £350,000 - £8,000 = £32,000
• After AEA: £32,000 - £3,000 = £29,000 taxable
• CGT at 24%: £6,960

CGT and spousal transfers

Transfers of property between spouses or civil partners living together are made at no gain, no loss — meaning:

• No CGT is triggered at the time of transfer
• The receiving spouse takes on the original acquisition cost (not the market value at transfer date)
• PPR relief applies based on the combined period of occupation by either spouse as their main home

Bed-and-spouse strategy for CGT planning: You can transfer a property (or shares in a property) to your spouse before sale to use their Annual Exempt Amount (£3,000) and potentially their lower CGT rate. This is entirely legal and widely used.

Note: If you are separated but not yet divorced (or civil partnership dissolved), the no gain/no loss treatment ends at the end of the tax year of separation. Transfers in subsequent years are treated as arm's-length disposals at market value.

Exchange vs completion — which date matters?

For CGT purposes, the disposal date is the date of completion, not exchange of contracts. This matters in two common situations:

1. Straddling tax years: If you exchange contracts in March (tax year 2025/26) and complete in April (tax year 2026/27), the gain falls in 2026/27. This gives you an extra year before reporting and payment.
2. The 60-day reporting clock: starts from completion date, not exchange.

For sellers trying to defer CGT to a new tax year, timing completion after 5 April is a valid planning tool — though solicitors should confirm exchange vs completion timing cannot be manipulated solely for tax reasons in cases where the parties are connected.

BADR and residential property

Business Asset Disposal Relief (BADR) — which reduces CGT to 10% on qualifying business assets — is not available on residential property. This applies even if the property is used in a business or held through a company that is also a trading company.

The only types of property transactions that might qualify for BADR-equivalent treatment are the disposal of commercial property used in a trading business or agricultural land held as a business asset. Standard buy-to-let residential property does not qualify.

Related calculators

The income tax calculator helps you determine whether your property gain will push you into the higher-rate CGT band, depending on your other income in the tax year.

The mortgage calculator is useful for modelling buy-to-let returns after accounting for CGT on eventual disposal.