Will you have to pay capital gains tax on property when you sell? The short answer is, it depends. Read on to find out if you’ll have to pay capital gains tax, and if this is the case, how you might be able to reduce your tax bill.
You pay capital gains tax when you sell an asset that has increased in value since you bought it.
Usually, when you sell your main home (or only home) you don’t have to pay any capital gains tax (CGT) due to private residence relief.
However, you’ll usually need to pay capital gains tax on property if you’re selling a buy to let property or second home. The tax is payable on any gain in its value above your CGT allowance (after any deductions have been taken off). Read on for more information on these.
Our guide is designed to explain what capital gains tax on property is and how it works. But it’s not designed to be financial advice. For capital gains tax advice tailored to your circumstances, we recommend you speak to a financial adviser.
In some circumstances you may have to pay capital gains tax when you sell your main home. For example:
Some of these points may be open to interpretation and dispute, so if you are in any doubt it is sensible to seek advice. An independent tax adviser can give you their unbiased view on whether your home will be exempt from CGT.
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Generally, yes. If HMRC decides that a property isn’t your main residence, you will have to pay capital gains tax (CGT) on any gain in its value above your CGT allowance (after any deductions have been taken off) when selling a second home.
Generally, yes. If your buy to let property has risen in value by more than your capital gains tax allowance by the time you sell it (after any deductions have been taken off) you’ll have tax to pay. See our guide for more advice on what to consider when selling a buy to let property.
If you give a property to your spouse or civil partner, or to a charity, there won’t be any CGT to pay.
If you inherit a property (and any inheritance tax due has been paid by the estate) then there won’t be any further tax to pay until you sell the property. The gain will be measured from the date at which you acquired the property.
While if you sell a property that was occupied by a dependent relative, then you may not have to pay CGT. Ask a tax adviser about this.
Capital gains tax rates on property vary based on a number of factors, such as your income and size of gain.
And it’s important to note that any capital gains tax will be added to your other income when calculating your income tax band for the year so this may push you into a higher bracket.
All taxpayers have an annual capital gains tax allowance, which means you can make a certain amount of profit of amount tax-free. You will only have to pay capital gains tax (CGT) on gains that exceed this annual allowance.
In the tax year 2025-2026 this allowance is £3,000. Couples who jointly own assets can combine their allowances, potentially allowing a gain of £6,000 without paying any capital gains tax for the tax year 2025-2026.
You’re not allowed to carry over any unused CGT allowance into the next tax year – so if you don’t use it, you’ll lose it.
In the government’s 2024 Autumn budget, capital gains tax rates were increased for people selling assets such as shares, with the lower rate increasing from 10% to 18%. While the higher rate increased from 20% to 24%.
This brought it into line with the capital gains tax rates on residential property, which remained unchanged.
With capital gains tax on property, it’s charged on the gains rather than the sale price. So to work out your gain, deduct the amount you originally paid for the property from the sale price. But it’s important to note there are various ways you can minimise or even eliminate a capital gains tax bill.
An independent financial/ tax adviser can explain how you may be able to reduce your capital gains tax bill.
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
Working out exactly how much capital gains tax (CGT) you have to pay means doing a few sums.
It’s important to note these figures are based on selling a residential property. Other assets may be calculated differently.
If you have capital gains in a particular tax year, you should apply to submit a tax return if you don’t do so already. And you must report and pay any capital gains tax due on UK residential property within 60 days of selling the property.
You may have to pay interest and a penalty if you do not report and pay on time.
So what happens if you’re selling a property abroad? You’re also liable to pay capital gains tax on property when you sell overseas if you’re a UK resident. However there are special rules if you’re a UK resident but your permanent home is abroad. And while you may also have to pay tax in the country you made the gain you may be able to claim relief if you’re taxed twice.
This depends on your income; basic rate taxpayers pay 18% on gains they make when selling property while higher and additional rate taxpayers pay 24%. However all taxpayers have an annual Capital Gains Tax allowance of £3000 per person in the tax year 2025/2026 and you may be able to may be able to deduct certain costs. For a detailed look at everything you need to take into account when selling your property, read our Step by step guide to selling your house.
If you’re selling a property and you’re liable for capital gains tax, such as if you’re selling a buy to let investment, you may be able to reduce your capital gains tax bill by deducting certain buying and selling costs like stamp duty and estate agent fees. But it’s important to get advice to make sure you do it right and pay what you owe. Make sure you’re up to speed on the legal side too, read our guide on Buy to let conveyancing for more information.
The capital gains tax allowance is £3,000 per person in the tax year 2025/ 2026. And couples who jointly own assets can combine their allowances, potentially allowing a gain of £6,000 without paying any capital gains tax. If you want financial advice but you’re confused about the cost of it, read our guide How much does financial advice cost.
There are other taxes to pay when it comes to UK property. When you buy a home, you may need to pay stamp duty. Although the amount you’ll pay will depend on the value of the property, whether it’s a second home or Buy to Let investment and whether you’re a UK resident.
You’ll also need to pay council tax and if you’re letting the property out you’ll probably need to pay income tax on the rent you receive.
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