Capital Gains Tax on UK Property 2026/27: PPR Relief, Lettings and 60-Day Rule

CGT rates on residential property

Capital gains on UK residential property are taxed at different rates from gains on other assets. The residential property rates in 2026/27 are:

• 18% — on the portion of the taxable gain that, when added to your income, falls within the basic-rate income tax band (up to £50,270 for 2026/27).
• 24% — on any portion of the gain that falls above the basic-rate threshold.

These rates were changed by the Autumn Budget 2024: the higher rate was reduced from 28% to 24% (with effect from 6 April 2024). These rates apply specifically to residential property — gains on commercial property, shares and most other assets use the general CGT rates of 18%/24% from October 2024 (previously 10%/20%).

The annual exempt amount for 2026/27 is £3,000 per individual (down from £6,000 in 2023/24 and £12,300 in 2022/23). This means the first £3,000 of net capital gains in a tax year is free of CGT.

The CGT calculation formula for property

The taxable gain on a property disposal is calculated as:

Enhancement expenditure means capital improvements that add to the value of the property — such as a loft conversion, extension or new kitchen when the property is first purchased and fitted out. It does not include routine maintenance and repairs (repainting, replacing a broken boiler like-for-like, fixing a roof tile). The distinction between capital improvement and revenue maintenance is a common source of disputes with HMRC.

Private Residence Relief (PPR)

PPR is the most valuable relief in property CGT. It exempts the gain attributable to periods when the property was your only or main home. If you owned the property and lived in it as your main home for the entire period of ownership, 100% of the gain is exempt — no CGT at all, regardless of how large the gain is.

If you owned the property for part of the time without it being your main home (because you let it, had a second home, or used it for business purposes), the fraction of the gain that is PPR-exempt is:

PPR fraction = (months as main home + 9 final months) ÷ total months owned

The 9 final months are added to the occupation period regardless of actual use during those months. For disabled persons or those in residential care homes, the final period is extended to 36 months.

Permitted absences that preserve PPR

The legislation also provides for certain "deemed occupation" periods that count as main residence even though you were not physically present:

• Any period of absence up to 3 years, for any reason — provided you occupied the property as your main home both before and after the absence.
• Any period when you (or your spouse) worked abroad.
• Up to 4 years when you worked elsewhere in the UK and your employer required you to live elsewhere.

These absences only count if the property was your main home immediately before and after the absence. If you let the property during an absence period, the deemed-occupation periods can run concurrently with the actual-letting period — a further complication that often requires professional calculation.

Lettings: the abolished Lettings Relief

Before April 2020, landlords who had previously lived in a property as their main home could claim Lettings Relief of up to £40,000 on the gain attributable to the period of letting. This was a substantial relief for "accidental landlords" who let their former home after moving.

From 6 April 2020, Lettings Relief was fundamentally restricted. It now only applies if the owner was in shared occupation of the property with the tenant during the letting period. This is an unusual arrangement (a live-in landlord) and effectively removes the relief for the vast majority of landlords who vacated the property before renting it out. For completeness, the maximum Lettings Relief remains £40,000 (or the amount of PPR, whichever is lower) for eligible cases, but eligible cases are now very rare.

Worked example: David — mixed residence and letting

The 60-day reporting and payment rule

Since 27 October 2021, UK residents disposing of UK residential property with a chargeable CGT gain must report the disposal and pay any CGT due within 60 days of the completion date. This is separate from (and earlier than) the annual Self Assessment return.

You report using the HMRC "Report and pay CGT on UK property" online service — sometimes called the Property Account. You will need to estimate your income for the year to determine your tax band, which can make the 60-day calculation uncertain for people with variable income. If your income estimate turns out to be wrong, you correct it through your annual Self Assessment return; the 60-day payment is treated as a payment on account.

You do not need to use the 60-day service if:

• The full gain is covered by PPR (no gain arises).
• The net gain after PPR and the annual exempt amount is zero or negative.
• The property is not UK residential property (e.g. commercial property, foreign property).

Penalties for missing the 60-day deadline: £100 automatic penalty for any lateness; further penalties of £300 (or 5% of tax if greater) at 6 and 12 months; daily penalties of £10 per day for days 1–90 after the deadline.

Non-UK residents: special rules

Non-UK residents are subject to Non-Resident CGT (NRCGT) on disposals of UK property. Since April 2019, NRCGT applies to gains on all UK land and property (residential and commercial) by non-UK residents. Losses on UK property can only be offset against other UK property gains for non-residents. Non-residents must also use the 60-day reporting service (or report within 60 days even if making a loss). The Annual Tax on Enveloped Dwellings (ATED) applies additional charges for residential properties held by companies valued above £500,000 and rented to connected persons.

CGT losses, bed-and-breakfast and other planning

Capital losses on UK property disposals are set against gains of the same year, then carried forward to future years (but not back). Report losses to HMRC even when there is no tax to pay — you protect the carried-forward amount by doing so. Losses on UK residential property are ring- fenced: they can only be offset against UK residential property gains, not against gains on shares or other assets.

The bed-and-breakfast rule prevents you selling a property and repurchasing the same (or substantially the same) property within 30 days solely to crystallise a loss. For property this is rarely a practical issue but the principle stands. Transferring property to a spouse before sale (to utilise their annual exempt amount or lower CGT rate) uses the no-gain/no-loss inter-spouse rule; careful timing and genuine transfer of beneficial ownership are required.