UK Second Home Capital Gains Tax 2026/27: 24% Higher Rate, 60-Day Reporting, PPR Interaction and Capital Losses

CGT Rates on Residential Property 2026/27

Since the October 2024 Autumn Budget, Capital Gains Tax on UK residential property (second homes, buy-to-let, investment property) is taxed at two rates depending on where the gain falls relative to the Income Tax higher-rate threshold:

The rates apply to the net chargeable gain — after deducting PPR relief, capital losses and the £3,000 annual exempt amount. If your taxable income leaves some basic-rate band available, that portion of the gain is taxed at 18% and the remainder at 24%.

Example of split rate: Taxable income £40,000 (leaving £10,270 of basic-rate band to £50,270). Chargeable gain £80,000. First £10,270 taxed at 18% = £1,849. Remaining £69,730 at 24% = £16,735. Total CGT = £18,584. Contrast with a higher-rate taxpayer (income already above £50,270) who would pay 24% on the full £80,000 = £19,200.

These residential property rates are notably higher than the main CGT rates for other assets (10% basic / 20% higher from October 2024 Budget), which now apply to shares, business assets and most other chargeable assets. The higher residential rates reflect the government's policy of taxing property investment gains more heavily than other asset classes.

What Counts as a Chargeable Gain

A chargeable gain arises on the disposal of a residential property that is not your only or main home throughout the period of ownership. "Disposal" means any transfer of ownership — sale, gift, exchange, or transfer to a trust. It does not include transfers between spouses or civil partners (which are generally no-gain no-loss transactions).

Properties that trigger CGT on disposal include:

• Buy-to-let properties — residential property held as an investment and let to tenants
• Second homes / holiday homes — properties you own in addition to your main home
• Inherited residential property — where you did not occupy it as your main home
• Former main homes now let — proportional CGT on the non-qualifying let period
• Gifted residential property — CGT at market value at date of gift (unless Gift Hold-Over Relief applies)

The gain is the difference between the disposal proceeds (or market value where gifted) and the allowable base cost. The basic calculation is:

Where a property is owned jointly (e.g., by spouses), each owner is assessed on their share of the gain independently, using their own annual exempt amount and tax rates. By default HMRC treats joint ownership as 50/50 — to use a different split, a Form 17 declaration of beneficial interests must be lodged with HMRC before the disposal.

Allowable Costs and Deductions

The following costs reduce the chargeable gain and should always be documented and deducted:

Capital improvements vs repairs. This distinction is critical. A new extension, loft conversion, or entirely new kitchen (replacing a non-existent or completely worn-out one) is capital expenditure — it enhances the property and is allowable for CGT. Repainting walls, fixing a leaking roof, or replacing a broken boiler with a like-for-like model are repairs and maintenance — they preserve the property's condition but do not enhance it, so they are income deductions (reducing rental profit) rather than CGT deductions. Keeping detailed records and invoices for all capital works, going back decades if necessary, is essential.

Where a property was purchased before 31 March 1982, the original cost is replaced by its market value at 31 March 1982 — you cannot go further back. HMRC provides guidance on obtaining historical valuations.

Principal Private Residence Relief Interaction

Principal Private Residence (PPR) relief — also called Private Residence Relief — can substantially reduce CGT on a second home if you lived in it as your main home for any part of the ownership period, or if you make a strategic PPR election.

Time-Apportioned PPR

Where you actually occupied a property as your main home for part of the ownership period, PPR exempts a time-proportional share of the gain:

The final 9 months of ownership are always treated as qualifying occupation provided the property was your main home at some earlier point — even if you were not living there during those last 9 months.

PPR Election for Two Properties

A married couple or civil partners living together can only have one main residence between them at any time for CGT purposes. If you own two properties simultaneously, you may elect which one is your main residence within two years of acquiring the second property. The election can be varied subsequently by written notice to HMRC.

The key strategic point: you can elect a property as your main residence for a short period — even a week — and immediately revert to the other property. This short designation, combined with the automatic 9-month final period, can generate meaningful PPR on the property you intend to sell. HMRC scrutinises "flipping" arrangements and the property must genuinely be a residence (not purely an investment property that you visited once); specialist advice is essential before using this approach.

Letting Relief No Longer Available

From April 2020, Letting Relief (which previously added up to £40,000 per owner of additional CGT exemption on former main homes that were let) was substantially abolished. It now applies only where the owner shared occupation with the tenant. For most second-home and buy-to-let disposals, no Letting Relief is available — only PPR for periods of actual occupation and the final 9 months.

The 60-Day Reporting Window

Since 27 October 2021, any UK resident who disposes of UK residential property at a gain must report it to HMRC and make a provisional CGT payment within 60 days of the completion date. This is a strict legal obligation under Schedule 2 of Finance Act 2019, with automatic penalties for late filing.

How to Report

Use HMRC's online "Report and pay CGT on UK property" service at gov.uk/report-and-pay-your-capital-gains-tax. You will need a Government Gateway account. If you do not have one already, set it up well in advance — the 60-day clock does not pause while you register. You will need:

• Your National Insurance number or Unique Taxpayer Reference
• The completion date and sale price
• Your purchase date and original price
• Details of all allowable costs
• Any PPR relief calculation
• Your estimated income for the tax year (to determine the CGT rate)

Provisional vs Final Tax

The 60-day return is based on an estimate of your income for the year (because the tax year has not yet ended when you file). If your actual income or other gains differ from the estimate, you reconcile the final position through your Self Assessment tax return for the relevant tax year. You may end up owing more CGT (pay on January 31 following the tax year) or be owed a refund.

Penalties for Late Filing

Note: the 60-day obligation applies even if you believe no tax is due (e.g., losses cover the gain) — you must still file the return within 60 days and indicate nil tax payable.

Capital Losses and the Annual Exempt Amount

Annual Exempt Amount: £3,000

Every individual has an annual CGT exempt amount — gains below this threshold are not taxed. For 2026/27 this is £3,000, down from £12,300 in 2022/23. Each owner of a jointly held property gets their own £3,000 allowance — so a couple selling a jointly owned second home has combined exemptions of £6,000.

The annual exempt amount cannot be carried forward if unused in a year — it is "use it or lose it." It also cannot be transferred between spouses. Capital losses must be deducted before the annual exempt amount applies.

Using Capital Losses

Capital losses from any CGT asset (shares, investment property, etc.) realised in the same tax year are set off against gains in that year — you cannot choose to defer them to a future year if there are current-year gains. If total losses exceed total gains in a year, the excess is carried forward indefinitely to reduce future gains.

Practical planning: If you are selling a second home and anticipate a large CGT bill, review your investment portfolio for any unrealised losses on shares or funds. Selling losing positions in the same tax year as the property disposal directly reduces the chargeable gain. This "bed and ISA" or "bed and spouse" strategy is commonly used to crystallise losses and immediately reinvest in the same holdings within an ISA (where future gains are sheltered) or via a spouse (using their base cost uplift).

Brought-forward losses. If you have capital losses reported on previous Self Assessment returns but not yet used, they can be offset against the property gain. Losses must be formally claimed on your Self Assessment return — they are not automatically applied. Check your HMRC records or previous returns for any carried-forward losses before finalising the 60-day return estimate.

Worked Disposal Examples

Example 1: Pure Investment Property (No PPR)

Helen bought a buy-to-let flat in Birmingham in April 2014 for £150,000. She never lived in it. She sells it in May 2026 for £285,000.

Helen's employment income is £55,000 (all within higher-rate band). CGT at 24%: £103,225 × 24% = £24,774. Due within 60 days of completion.

Example 2: Former Main Home, Now Let — Partial PPR

James bought a London flat in January 2010 for £220,000. He lived in it as his main home until December 2017 (96 months). He then moved in with his partner and let the flat from January 2018. He sells it in March 2026 for £480,000. The letting was standard (no shared occupation). No capital improvements.

James is a higher-rate taxpayer. CGT at 24%: £112,608 × 24% = £27,026. Must be reported and paid within 60 days of completion (March 2026 completion = deadline late May 2026).

Example 3: Jointly Owned Second Home with Capital Losses

Sarah and Tom own a coastal cottage jointly (50/50), bought for £160,000 in 2012, sold April 2026 for £310,000. Neither lived there — pure holiday home. Costs: SDLT + conveyancing both sides + agent fees = £12,000 total. Sarah has £15,000 of brought-forward capital losses. Tom has no losses. Both are basic-rate taxpayers (income around £35,000 each).

Combined CGT liability: £26,248. Sarah saves £3,600 by using her brought-forward losses (£15,000 × 24% = £3,600). Both must file 60-day returns by late June 2026.

Key Planning Points

Before selling a second home, consider the following planning steps:

• Check for a PPR election opportunity. If you ever lived in the property as a main residence, ensure you have made a PPR election (if two properties were held simultaneously) and consider whether a brief return to residence before sale could extend PPR coverage, plus the final 9-month tail.
• Transfer share to lower-earning spouse before sale.Transfers between spouses are no-gain no-loss. Shifting a share of the property to the lower-earner gives them use of their lower CGT rate (18% rather than 24%) and their own £3,000 annual exempt amount. HMRC requires genuine transfer of beneficial interest, not a sham arrangement.
• Crystallise capital losses in the same tax year.Review investment portfolios for unrealised losses before completing the property sale. Realising those losses in the same tax year reduces the chargeable property gain directly.
• Maximise allowable costs. Gather every invoice for capital improvements made since acquisition. Even modest sums add up over a 10-20 year ownership: a new extension in 2018, a kitchen in 2012, new windows in 2015 — these all reduce the gain. Repairs and maintenance invoices are not CGT deductible but may have reduced rental income tax in earlier years.
• Consider timing across tax years. If you are near the end of a tax year and your income has been unusually high, delaying completion until after 6 April may result in a lower CGT rate if income is expected to fall. Conversely, if you have unused basic-rate band in the current year, completing before 6 April captures 18% on more of the gain.
• Set up Government Gateway access early. Do not wait until the 60-day deadline begins. If you do not already have an HMRC online account, create one before exchange of contracts — identity verification can take weeks.

Official References

• gov.uk: Report and pay CGT on UK property (60-day return)
• gov.uk: Capital Gains Tax rates
• gov.uk: Tax when you sell your home (PPR)
• HMRC Capital Gains Manual: Private Residence Relief (CG64200+)
• HMRC Capital Gains Manual: Land and property (CG70200+)
• HS283 — Private Residence Relief helpsheet
• TCGA 1992 Part II — Chargeable gains

Frequently Asked Questions