Capital Gains Tax on property: what you pay when selling property in 2026/27

Capital Gains Tax on property may apply when you sell, gift or otherwise dispose of property that has increased in value. The rules can affect landlords, second-home owners, people selling inherited property, landowners and business owners disposing of commercial premises.

Capital Gains Tax is charged on the taxable gain rather than the full sale proceeds. The calculation normally starts with the amount received for the property and deducts its allowable acquisition cost, qualifying improvement expenditure and eligible disposal expenses.

For 2026/27, individuals have a £3,000 Capital Gains Tax Annual Exempt Amount. Residential-property gains are generally charged at 18% to the extent that they fall within the individual’s unused basic-rate Income Tax band and 24% on the remaining taxable gain. Which rate applies depends on your wider Income Tax position, explained fully in our ultimate guide to personal tax in the UK.

This guide explains how tax on selling property works, how to calculate the gain, which reliefs may apply and when a property sale must be reported to HMRC.

When does Capital Gains Tax on property apply?

You may need to pay Capital Gains Tax when you dispose of property that is not fully covered by an exemption or relief.

Common property disposals that can create a liability include:

• Selling a buy-to-let property.
• Selling a second home or holiday property.
• Disposing of land held as an investment.
• Selling an inherited property after it has increased in value.
• Selling business premises owned personally.
• Giving property to another person where market-value rules apply.
• Transferring property into a company.

A disposal does not have to involve an ordinary sale. Giving property away, transferring it for less than market value or exchanging it for another asset can also create a disposal for Capital Gains Tax purposes.

How Property Capital Gains Tax is calculated

The basic Property Capital Gains Tax calculation is:

Disposal proceeds minus allowable acquisition costs, capital improvements and disposal expenses equals the capital gain.

After calculating the initial gain, you may then deduct:

• Allowable capital losses.
• Any available property relief.
• The £3,000 Annual Exempt Amount for 2026/27, where unused.

The remaining amount is the taxable gain. Your taxable income is then considered to determine how much of the gain is charged at 18% and how much is charged at 24%.

Allowable purchase costs

Allowable acquisition expenditure can reduce the gain and therefore the final property disposal tax liability.

Qualifying costs may include:

• The original purchase price.
• Stamp Duty Land Tax paid when buying the property.
• Solicitor and conveyancing fees.
• Professional valuation fees directly connected with the acquisition.
• Certain survey costs incurred as part of purchasing the property.

Mortgage interest and ordinary borrowing costs are not normally added to the property’s Capital Gains Tax base cost. Finance costs are considered under separate property-income rules.

Allowable selling costs

Costs incurred wholly and exclusively in connection with the disposal may also reduce the taxable gain.

These can include:

• Estate agent fees.
• Solicitor and conveyancing charges.
• Professional valuation costs relating to the sale.
• Auctioneer fees.
• Qualifying advertising costs connected with the disposal.

Completion statements, invoices and supporting documents should be retained so each deduction can be demonstrated if HMRC reviews the calculation.

Capital improvements and repairs

One of the most common mistakes in a Selling property Capital Gains Tax calculation is failing to distinguish capital improvements from routine repairs.

A capital improvement generally enhances the property, creates something new or increases its value beyond restoring it to its original condition. The improvement must usually still be reflected in the property when it is sold.

Examples can include:

• Building an extension.
• Converting a loft into additional accommodation.
• Adding a bathroom where none existed previously.
• Carrying out substantial structural alterations.
• Installing a permanent feature that improves the property.

Routine repairs generally maintain or restore an existing feature. Repainting, replacing broken roof tiles or repairing plumbing would not normally be added to the capital cost if they are ordinary revenue expenses.

The same cost should not receive tax relief twice. An expense already deducted from rental income cannot normally be claimed again against the capital gain.

Capital Gains Tax rates on residential property

For disposals during 2026/27, individual residential-property gains are generally taxed at:

A basic-rate taxpayer does not automatically pay 18% on the entire gain. The taxable gain is added on top of taxable income, so part may be charged at 18% and the balance at 24%.

Someone whose other income already uses the full basic-rate band will generally pay 24% on the whole taxable residential-property gain.

The £3,000 Annual Exempt Amount

Each individual has a £3,000 Capital Gains Tax Annual Exempt Amount for 2026/27. This exemption applies to total taxable gains for the tax year rather than separately to each property or asset.

The allowance cannot be carried forward. If it is not used during the tax year, it is lost.

Married couples and civil partners each have their own exemption. Where property is genuinely jointly owned, each person calculates and reports their own share of the gain.

Private Residence Relief on a main home

A gain on the sale of your only or main home may be fully covered by Private Residence Relief.

Full relief normally depends on factors including whether:

• The property was your only or main residence throughout ownership.
• You genuinely occupied it as your home.
• No part was used exclusively for business purposes.
• The grounds and gardens fall within the permitted rules.
• You did not acquire it mainly to make a gain from resale.

Partial relief may be available where the property was your home for only part of the ownership period. The final nine months of ownership generally qualify where the property was your only or main residence at some point, even if you were no longer living there during that final period.

Evidence of genuine occupation can be important. Brief or artificial occupation does not necessarily establish that a property was an individual’s main residence.

Letting Relief after renting out a former home

Letting Relief is now considerably narrower than under earlier rules.

It may be available where the owner shared occupation of the home with the tenant while the property was also the owner’s main residence. It does not generally apply merely because an owner moved out and subsequently let the whole property.

Landlords should not assume that a former home automatically qualifies for Letting Relief simply because it was rented for part of the ownership period.

Capital Gains Tax on a buy-to-let property

A buy-to-let property normally does not qualify for full Private Residence Relief because it is held as an investment rather than occupied as the owner’s main home.

When selling, the landlord should:

1. Confirm the sale proceeds.
2. Identify the original acquisition cost.
3. Collect evidence of legal, agent and transaction expenses.
4. Separate qualifying improvements from repairs.
5. Review available capital losses.
6. Apply the Annual Exempt Amount where available.
7. Calculate the gain using the applicable 18% and 24% rates.

If the landlord lived in the property before letting it, partial Private Residence Relief may need to be calculated.

Capital Gains Tax on inherited property

Inheritance itself does not normally create Capital Gains Tax for the beneficiary. For a later sale, the starting value is generally the property’s market value at the date of death rather than the amount originally paid by the deceased.

If the property increases in value between the date of death and the later sale, the beneficiary may have a taxable gain.

Probate valuations, improvement invoices and sale costs should be retained to support the calculation.

Tax on selling land and commercial property

Land and commercial premises can also create Capital Gains Tax liabilities.

Individuals generally calculate gains using the same broad principles: disposal proceeds less acquisition costs, qualifying enhancement expenditure and sale expenses.

However, different reliefs may apply where the property is connected with a trading business. Business Asset Disposal Relief, Gift Hold-Over Relief or Rollover Relief may be relevant in limited circumstances, but ordinary investment property does not automatically qualify.

Transfers between spouses and civil partners

Transfers between spouses and civil partners who are living together generally take place on a no-gain, no-loss basis.

The receiving spouse or civil partner normally inherits the transferor’s original acquisition history. The transfer does not reset the property’s base cost to current market value.

A genuine transfer completed before a sale may allow both individuals’ Annual Exempt Amounts and tax bands to be used. However, the legal ownership, mortgage position, rental income allocation and Stamp Duty Land Tax implications should be reviewed before making any change.

The 60-day Capital Gains Tax reporting deadline

Where a UK resident sells UK residential property and Capital Gains Tax is due, the disposal must generally be reported and an estimated payment made within 60 days of completion.

The seller normally needs to submit a UK Property CGT return containing:

• The property address.
• The completion date.
• The purchase and sale values.
• Allowable acquisition and disposal costs.
• Capital improvement expenditure.
• Available reliefs and losses.
• An estimate of taxable income for the year.

The sale may also need to be included on the seller’s Self Assessment tax return. The final liability can differ from the initial 60-day estimate once income and gains for the whole tax year are known.

Late reporting or payment can result in penalties and interest.

Example of Capital Gains Tax on property

Amira sells a buy-to-let property for £430,000. She originally bought it for £270,000.

Her qualifying costs are:

• Stamp Duty Land Tax and purchase legal fees: £14,000.
• A qualifying extension: £32,000.
• Estate agent and sale legal fees: £10,000.

The gain is calculated as follows:

• Sale proceeds: £430,000.
• Less purchase price: £270,000.
• Less acquisition costs: £14,000.
• Less qualifying improvement costs: £32,000.
• Less disposal costs: £10,000.
• Gain before losses and exemption: £104,000.
• Less Annual Exempt Amount: £3,000.
• Taxable gain: £101,000.

The final tax depends on Amira’s taxable income and whether any part of the gain falls within her unused basic-rate band. She must also report and pay the estimated liability within 60 days of completion.

Common property disposal tax mistakes

• Calculating tax on the full sale price rather than the gain.
• Forgetting Stamp Duty Land Tax and purchase legal fees.
• Failing to retain evidence of capital improvements.
• Claiming repair expenditure twice.
• Assuming every main-home sale is fully exempt.
• Applying outdated CGT rates or allowances.
• Missing the 60-day reporting deadline.
• Ignoring available capital losses.
• Changing ownership after the sale has become legally binding.

What to review before selling property

Before exchanging contracts, property owners should:

• Estimate the expected gain.
• Locate purchase and improvement records.
• Check whether Private Residence Relief applies.
• Review available capital losses.
• Confirm the likely CGT rate.
• Consider genuine ownership planning early.
• Budget for the tax liability.
• Prepare for the 60-day reporting requirement.

Planning before the disposal becomes legally binding gives the owner more opportunity to check records and consider available reliefs.

Key points about tax on selling property

Capital Gains Tax on property can arise when selling a buy-to-let, second home, inherited property, land or business premises. The liability is based on the taxable gain after allowable costs, losses, reliefs and the Annual Exempt Amount have been considered.

For 2026/27, residential-property gains are generally taxed at 18% and 24%, depending on the seller’s taxable income. Where tax is due on a UK residential-property sale, the disposal usually needs to be reported and paid within 60 days of completion.

Accurate records and an early calculation help property owners understand their likely property disposal tax, claim available deductions and avoid late-reporting penalties.

Case Study: Planning a Property Sale Before Capital Gains Tax Became Due

A landlord visited our Fulham Broadway office before selling a buy-to-let property and wanted to understand the likely Capital Gains Tax on property before accepting an offer. They were unsure which costs could be deducted, whether previous improvement work qualified for relief and how the 60-day HMRC reporting deadline would affect the sale.

During the consultation, we reviewed the property’s purchase history, legal costs, improvement expenditure and expected sale proceeds to prepare a detailed Property Capital Gains Tax calculation. We explained the difference between qualifying capital improvements and routine repairs, identified the allowable acquisition and disposal costs that could reduce the taxable gain and reviewed whether any available reliefs or capital losses could be claimed. We also discussed the 2026/27 CGT rates, the £3,000 Annual Exempt Amount and the requirement to report and pay any Capital Gains Tax due within 60 days of completing the sale.

As a result, the landlord understood their likely property disposal tax liability before exchanging contracts, gathered the correct supporting records and was fully prepared to meet HMRC’s reporting requirements without unnecessary delays or penalties.