CGT on Property UK 2026: Residential (18%/24%) vs Commercial, PPR Relief & the 60-Day Rule

Quick answer

If you sell a UK property that isn't your main home — a buy-to-let, an inherited house, a second home, or land — you may owe Capital Gains Tax (CGT) on the profit. For 2026/27 the residential CGT rates are 18% on gains that fall within your basic-rate income-tax band and 24% on gains in the higher or additional-rate band. You have only £3,000 of gains exempt per year, and a firm 60-day deadline to report and pay after completion. Your own home is almost always fully exempt under Private Residence Relief (PRR). This guide unpacks each rule with worked examples.

The 2026/27 rates: 18% and 24% on residential property

Residential property has its own CGT rate schedule, introduced from 6 April 2016 and revised in October 2024. The rates in 2026/27 are:

These rates replaced the previous 18%/28% schedule that applied from April 2020. The reduction from 28% to 24% for higher-rate disposals was announced in the Autumn Budget on 30 October 2024.

To determine which rate applies, you stack the taxable gain on top of your income for the year. If your income already uses the entire basic-rate band (i.e. taxable income above £50,270), every pound of gain is taxed at 24%. If you have unused basic-rate band, the first slice of the gain gets 18% and the remainder gets 24%.

Worked example: buy-to-let sale

Sarah, a higher-rate taxpayer, sells a rental flat she bought in 2015:

• Sale price: £320,000
• Purchase price: £220,000
• Allowable costs (legal fees, SDLT on purchase, estate agent on sale): £14,000
• Capital improvements (new bathroom and kitchen): £16,000

Gross gain: £320,000 − £220,000 = £100,000
Less costs: −£14,000
Less improvements: −£16,000
Net gain: £70,000
Less Annual Exempt Amount: −£3,000
Taxable gain: £67,000
Sarah's income already exceeds £50,270, so all £67,000 is taxed at 24%: CGT = £16,080.

If Sarah's income had left £15,000 of basic-rate band unused, the first £15,000 of gain would be taxed at 18% (= £2,700) and the remaining £52,000 at 24% (= £12,480): total CGT = £15,180 — a saving of £900 from the lower rate.

The £3,000 Annual Exempt Amount

Every individual has a CGT Annual Exempt Amount (AEA) — a slice of gains each year that is free of tax. In 2026/27 it is £3,000. This is a dramatic reduction from £12,300 in 2022/23; the threshold was halved to £6,000 for 2023/24 and halved again to £3,000 from 2024/25.

The AEA is shared across all asset classes in the year — property, shares, crypto, collectibles — so if you have realised other gains in the same tax year, they eat into the same £3,000. Unused AEA cannot be carried forward: it is entirely use-it-or-lose-it each 6 April.

Couples who jointly own a property each have their own £3,000 exemption, effectively sheltering the first £6,000 of combined gain.

Allowable deductions: reduce the gain legitimately

Many people overpay CGT by forgetting costs they are entitled to deduct from the gain. You can subtract:

• Purchase costs: legal fees, survey fees, and the Stamp Duty Land Tax you paid when you bought.
• Sale costs: estate agent commission, legal fees on disposal, and any advertising costs.
• Capital improvements: extensions, a conservatory, a new kitchen that replaces a non-existent one, loft conversion — work that adds value and isn't merely maintenance.
• Enhancement expenditure on planning, structural surveys and professional fees associated with improvements.

Routine repairs, decoration, and replacement of like-for-like fixtures are notdeductible from the gain — they may be allowable expenses against rental income instead, but they don't reduce CGT. Keep every invoice from the day you buy: on a £60,000 gain, an evidenced £15,000 of improvements saves up to £3,600 at the 24% rate.

Private Residence Relief: your main home is almost always exempt

Private Residence Relief (PRR) is the most important CGT relief for homeowners. If the property has been your only or main residence throughout your entire period of ownership, the full gain is exempt — you pay no CGT at all.

PRR is restricted in several common situations:

• Periods of letting the whole property: time when the property was not your main home and was let to tenants reduces the PRR fraction. Letting Relief that used to offset this was abolished for full lettings from April 2020.
• Exclusive business use: a room used solely and exclusively for business (and never for personal use) may reduce PRR proportionately. Working from home in a room that also serves as a bedroom does not trigger this restriction.
• Large grounds: PRR covers grounds up to approximately half a hectare (about 1.2 acres). Gain on excess land or garden sold as a building plot may be taxable.
• Two homes: if you genuinely use two properties as homes you can elect which one is your main residence for PRR, but you must make a valid nomination within two years of acquiring the second property.

The final 9-month exemption

Even after you move out of a property, the final 9 months of ownership always qualify for PRR, regardless of whether you are living there or have let it. This gives a practical window to sell your former home without every month of vacancy generating a taxable gain.

The final period was 36 months before April 2014, reduced to 18 months in April 2014, and reduced again to 9 months in April 2020. Disabled homeowners and those in long-term residential care still benefit from a 36-month final period under HMRC's extended rules.

Example: partial PRR on a former home that was later let

Mark owned a house for 8 years (96 months). He lived in it as his main home for 6 years (72 months), then moved and let it for 2 years (24 months) before selling. Total gain after costs: £80,000.

• Qualifying period: 72 months (occupation) + 9 months (final period, overlapping with letting) = 81 months
• Non-qualifying period: 96 − 81 = 15 months
• PRR fraction: 81 ÷ 96 = 84.375%
• Exempt gain: £80,000 × 84.375% = £67,500
• Chargeable gain: £80,000 − £67,500 = £12,500
• Less AEA: −£3,000
• Taxable gain: £9,500
• CGT at 24% (higher-rate taxpayer): £2,280

Letting relief is £0 because Mark did not share occupation with the tenant.

The 60-day reporting rule: the deadline many people miss

This is the single biggest source of avoidable penalties on property CGT. If you sell UK residential property and there is any CGT to pay after reliefs and the AEA, you must:

1. Report the disposal via HMRC's UK Property Reporting Service (separate from Self Assessment, accessed via Government Gateway)
2. Pay the estimated CGT due

Both steps must happen within 60 days of the completion date. The clock starts on the day legal completion occurs — not exchange of contracts, not the date you receive funds.

You must alsoinclude the disposal on your annual Self Assessment return (due 31 January the following year). The 60-day payment is credited against the final liability, so you're not double-paying — but the 60-day report is a separate legal obligation that cannot be replaced by simply filing your Self Assessment on time.

Penalty for missing the 60-day deadline: £100 fixed penalty, escalating to further penalties at 6 months (up to £300 or 5% of CGT due, whichever is higher) and 12 months, plus interest on unpaid tax from the 60-day deadline.

Exception: If PRR fully exempts the gain and no CGT is payable, no 60-day report is needed.

Commercial property: the same rates, different rules

From 30 October 2024, the CGT rates on commercial and non-residential property were aligned with residential rates: 18% and 24%. Before October 2024, commercial property gains were taxed at 10% and 20% (the lower main rates that had applied since 2016).

Key differences from residential CGT:

• No 60-day reporting deadline — commercial disposals are reported only through the annual Self Assessment return (or Company Tax Return for companies).
• Business Asset Disposal Relief (BADR) — formerly Entrepreneurs' Relief — can still apply to qualifying business assets at a reduced 10% rate (for gains within the £1 million lifetime limit), but BADR does not apply to investment property (e.g. commercial premises held as investments).
• No PRR equivalent — there is no main-residence-style exemption for commercial property.
• Mixed-use property — a building that is part residential and part commercial (e.g. a flat above a shop) is split proportionately: the residential element uses the 18%/24% residential rates and triggers the 60-day rule; the commercial element uses the same 18%/24% non-residential rates but without the 60-day deadline.

Using a spouse or civil partner's allowances

Transfers of assets between spouses and civil partners are CGT-free at any time. This creates genuine planning opportunities before a property sale:

• Two Annual Exempt Amounts: jointly owned property means each owner uses their own £3,000 exemption — £6,000 sheltered instead of £3,000.
• Lower-rate bands: if one partner pays basic-rate tax, their share of the gain may attract 18% rather than 24%.
• Gift before sale: gifting a share to a lower-earning partner before exchange of contracts can significantly reduce the total CGT bill.

The transfer must be genuine and completed before the sale. You cannot retrospectively split a gain after exchange of contracts. Use the CGT calculator to model both scenarios.

Offsetting capital losses

Capital losses on other assets — shares that have fallen in value, crypto, other properties — can be offset against property gains in the same tax year. Unused losses carry forward indefinitely once reported to HMRC (within four years of the end of the tax year in which the loss arose). Deliberately realising a loss on a poorly-performing asset in the same year as a large property sale is a legitimate planning strategy, though you should not let tax considerations alone drive investment decisions.

Inherited property: the probate value base cost

When you inherit a property there is no CGT at the point of inheritance (Inheritance Tax may apply to the estate instead). Your CGT base cost is the probate value — the market value at the date of death. If you subsequently sell for more than that probate value, the gain since death is subject to CGT at 18%/24%, and the 60-day rule applies if residential. This surprises many beneficiaries who hold an inherited property for several years before selling into a rising market.

How CGT interacts with your income tax band

The split between 18% and 24% depends on your income for the year of disposal. A year in which your income is unusually low — a career break, the year you retire, or the first year of drawdown before you take much pension income — may mean more of the gain falls into the 18% band. Conversely, selling in a year when you receive a large bonus could waste the lower rate entirely.

If you have any flexibility over the completion date, modelling the gain against different income scenarios before you exchange contracts can save thousands. Use the income tax calculator alongside the CGT calculator to compare.

Gifting property: the disposal-at-market-value trap

Giving away a property is a disposal at market value for CGT purposes, even if no money changes hands. If you gift a buy-to-let to your children, you can owe CGT on the uplift as though you had sold it at full market price. PRR does not apply to a property you haven't lived in.

There is also the Inheritance Tax trap: if you give away your main home but continue to live in it rent-free, HMRC treats it as a Gift with Reservation of Benefit. The property remains in your estate for IHT purposes, so you get the CGT disposal event with none of the IHT saving. Genuinely transferring a home — where the donor pays full market rent or moves out entirely — is a complex area where professional advice is essential before acting.

Keep your paperwork from day one

The easiest CGT planning is free: keep records. From the day you buy a property, store:

• The completion statement showing purchase price and SDLT paid
• Legal and survey invoices on purchase
• Every invoice for capital improvements, with a brief note of what the work was
• For an inherited property, the probate valuation
• Estate agent and legal invoices on sale

Years or even decades can pass between buying and selling. Missing £20,000 of valid improvement costs could cost you up to £4,800 in unnecessary CGT at the 24% rate.

Summary: CGT on property in 2026/27 at a glance

This article is general information, not tax advice. Figures apply to 2026/27 UK tax year for England, Wales and Northern Ireland. Scotland uses the same CGT rates. Property CGT can be complex — consider taking professional advice before disposing of a property.