UK Second Property CGT Planning Strategies 2026/27

Selling a second home or buy-to-let property in the UK triggers Capital Gains Tax, and the rates on residential property are among the highest CGT rates available. But there are legitimate planning strategies that can substantially reduce your bill -- if you plan ahead. This guide covers every major technique for 2026/27.

CGT Rates on Residential Property in 2026/27

Capital Gains Tax on UK residential property (that does not qualify for Principal Private Residence relief) is charged at:

• 18% if the gain falls within the basic rate Income Tax band
• 24% if the gain falls in the higher rate band

These rates apply from April 2024. The blended rate depends on your total income in the year of disposal, not just the gain. If you have taxable income of £30,000, you have around £20,000 of basic rate band remaining (up to £50,270). Gains up to that amount are taxed at 18%; gains above are taxed at 24%.

The annual exempt amount for 2026/27 is £3,000. This is the amount of gains you can make tax-free each year, though it has been cut sharply in recent years.

The 60-Day Reporting and Payment Rule

The 60-day rule applies to:

• Buy-to-let properties
• Second homes
• Holiday lets
• Any residential property that does not fully qualify for Principal Private Residence relief

To report, you use HMRC's online "Report and Pay CGT on UK Property" service (sometimes called the "60-day return" or UK Property Return). You will need a Government Gateway account and your property details, purchase price, and allowable costs.

Note: you still include the disposal on your annual self-assessment if you file one. The 60-day payment is a payment on account -- it is reconciled in your self-assessment.

Principal Private Residence Relief (PPR)

PPR is the most valuable relief available. If the property was your main home for the entire period of ownership, the gain is fully exempt from CGT.

If it was your main home for only part of the ownership period, you receive a proportionate exemption. Additionally, the final 9 months of ownership are always treated as a period of main residence -- regardless of whether you were living there.

Example: You owned a property for 10 years (120 months). You lived in it for 5 years (60 months), then rented it out for 5 years. On sale, 60 months (lived) plus 9 months (final period) = 69 months out of 120 qualify for PPR. That is 57.5% of the gain exempt.

Periods of absence that can also count as deemed occupation (subject to conditions):

• Any period up to 3 years for any reason
• Any period while working abroad
• Up to 4 years while required to live elsewhere for work

Letting Relief -- Now Very Limited

Letting relief used to be a valuable relief of up to £40,000 per owner. Since April 2020, it is only available where the owner was living in the property at the same time as the tenant (shared occupancy).

This makes it very rare in practice. Most buy-to-let and second home disposals will not qualify. If you do share your home with a lodger and later sell, letting relief may still apply.

Nominating Your Main Residence

If you own two or more properties, you can elect which one is your main residence for PPR purposes. This election must be made within 2 years of acquiring the second property.

The election does not have to reflect where you actually spend most of your time -- it is a legal choice. This strategy is particularly useful if:

• One property is in an area of higher capital growth
• You plan to sell one property soon
• One property has a much larger potential gain

You can change the nomination at any time, and the change affects future periods of ownership (plus the 9-month final period rule applies to whichever property you elect at the point of sale).

Important: if you do not make an election within 2 years, HMRC decides which property was your main residence based on the facts -- you lose the planning opportunity.

Transferring to a Spouse or Civil Partner

Transfers between spouses and civil partners are on a no-gain/no-loss basis -- there is no CGT event on the transfer. This creates planning opportunities:

Using both annual exempt amounts: Each individual has their own £3,000 annual exempt amount. If one spouse sells, only one exemption is used. If you transfer half the property to your spouse first, then you sell jointly, both exemptions apply -- saving up to £1,080 in tax (if both are higher rate taxpayers, 24% of £3,000 each = £1,440 combined saving).

Shifting to a lower rate: If one spouse is a basic rate taxpayer (18% CGT) and the other is a higher rate taxpayer (24%), transferring a larger share to the basic rate spouse before sale reduces the overall CGT bill.

The transfer itself must be a genuine outright gift with no conditions attached. HMRC may challenge arrangements that look artificial.

Timing the Sale Across Tax Years

The annual exempt amount resets on 6 April each year. If you have a large gain, completing the sale in one tax year and deferring another disposal to the next tax year means you can use two annual exemptions.

Similarly, if your income varies year to year, selling in a lower-income year can mean more of the gain falls in the 18% band rather than the 24% band.

Bed and Breakfast rules: Unlike shares, there are no bed and breakfast matching rules for property. Selling and rebuying the same property is not prevented by the same 30-day rule that applies to shares.

Capital Losses

Capital losses on other assets (including other property disposals, shares, or other capital assets) can be offset against gains. Losses are applied against gains in the same year first, then carried forward.

Losses carried forward from previous years must be used in the first year you have gains, but only to the extent that they reduce your net gains to the annual exempt amount (£3,000) -- you cannot "waste" losses below the exempt amount.

Crystallising losses: If you hold assets sitting at a loss, you might consider selling before selling the profitable property in the same tax year, to offset the gain.

Gifting to Children

Gifting a residential property to your children is a CGT disposal at market value -- even though you receive no cash. The gain is calculated as if you sold at the current market value.

Hold-over relief (which defers the gain until the recipient sells) is not available for gifts of residential property to individuals. It is available for gifts to certain types of trust, but trust CGT rules have become more complex and less beneficial in recent years.

If you gift a property, the recipient acquires it at the market value at the date of the gift. Their future gain is measured from that value -- so if the property has already grown significantly, much of the gain is taxed on you now.

Allowable Costs That Reduce Your Gain

Do not forget to include all allowable costs when calculating your gain:

• Original purchase price and SDLT paid
• Legal and surveyor fees on purchase
• Estate agent fees on sale
• Legal fees on sale
• Costs of capital improvements (not repairs)
• Enhancement expenditure (e.g., extension, new bathroom -- not like-for-like repairs)

Keeping receipts and records of all these costs from the day of purchase is essential, especially for properties held for many years.

Using Our Calculator

Frequently Asked Questions

Do I have to pay CGT if I sell a property I lived in for a few years and then rented out? PPR relief covers the period you lived there plus the final 9 months. The rental period (minus the final 9 months) is taxable. You may also be able to claim deemed occupation reliefs for certain periods of absence.

What is the CGT rate on a buy-to-let property I sell in 2026/27? 18% if the gain falls within your remaining basic rate band, or 24% if it falls in the higher rate band. Most landlords with significant rental income will find the higher rate applies to much or all of the gain.

When exactly is the 60-day clock running? The 60 days run from the date of legal completion, not exchange of contracts. Make sure your solicitor knows to alert you promptly after completion.

Can I use my pension contributions to reduce CGT? Pension contributions extend your basic rate band, which means more of your gain could fall at 18% rather than 24%. Contributing to a pension in the year of disposal is a legitimate way to reduce your CGT rate.

If my spouse and I jointly own the property, do we each get the annual exempt amount? Yes. Each individual has their own £3,000 annual exempt amount. Joint owners each calculate their share of the gain and apply their own exemption.

Can I deduct the cost of the extension I built? Yes. Capital improvements that added value to the property -- extensions, conversions, structural works -- are allowable enhancement expenditure that reduces your gain.

What happens if I do not report within 60 days? HMRC will issue an automatic penalty. Interest also runs from day 61 on any unpaid CGT. The longer you delay, the larger the penalties and interest.

Can I avoid CGT by moving back into the property before selling? The final 9 months are automatically exempt if the property was ever your main home. If you move back in earlier, more of the ownership period counts as main residence. However, HMRC can challenge this if the move-back appears artificial and short-term.

Is there any relief for the extra 5% SDLT I paid on buying the second home? SDLT is not deductible for income tax purposes, but it is an allowable cost for CGT -- it increases your base cost and reduces your gain.

Does PPR apply to furnished holiday lets? No. Furnished holiday lets are treated differently -- they used to qualify for Business Asset Disposal Relief (BADR) but this ended in April 2025. Check current rules if you hold a holiday let.