Capital Gains Tax on UK Property in 2026: The Rates, Rules and Worked Examples

For higher-rate taxpayers, capital gains tax can turn a healthy-looking property profit into a much thinner number. Here is exactly how CGT works on UK property in 2026, with the maths laid out.

Key Takeaways

• Two CGT rates: Residential property gains are taxed at 18% (basic rate) or 24% (higher and additional rate) from the 2024 Autumn Budget onwards.
• £3,000 allowance: The annual exempt amount for 2026/27 is £3,000 per person, use-it-or-lose-it each tax year.
• 60-day reporting: You must report and pay CGT to HMRC within 60 days of completing a UK residential property sale.
• Deductible costs: Purchase fees, selling fees, stamp duty paid and capital improvements all reduce your taxable gain.

Current CGT Rates for Residential Property

Since the Autumn Budget 2024, CGT on residential property is charged at two rates. Basic-rate taxpayers pay 18% on gains that fall within the basic-rate band. Higher-rate and additional-rate taxpayers pay 24%.

Before October 2024, the higher rate was 28%. The reduction to 24% was designed to encourage more property disposals and unlock housing supply. The basic rate stayed at 18%.

The rate you pay depends on your total taxable income plus the gain. If adding the gain to your income pushes you above the basic-rate threshold (£37,700 for 2025/26), the portion above that threshold is taxed at 24% and the rest at 18%.

Q: Does CGT apply to my main home?

A: No. Your principal private residence is exempt from CGT under Private Residence Relief, provided you have lived in it as your main home throughout ownership. CGT only applies to second homes, buy-to-let properties and other non-primary residences.

How to Calculate CGT on a Property Sale

The calculation follows five steps:

1. Sale price minus purchase price = gross gain
2. Subtract allowable costs (see next section)
3. Subtract the annual exempt amount (£3,000 for 2026/27)
4. Determine your tax band by adding the remaining gain to your taxable income
5. Apply 18% or 24% accordingly

If you own the property jointly, each person has their own £3,000 allowance. A couple selling a jointly owned buy-to-let can shield £6,000 of gains before tax applies.

The annual exempt amount cannot be carried forward. If you do not use it in a tax year, it is gone.

Allowable Costs and Deductions

Not every pound of profit is taxable. HMRC allows you to deduct certain costs from the gain:

Buying costs: solicitor fees, surveyor fees, stamp duty paid at purchase.

Selling costs: estate agent fees, solicitor fees, EPC certificate costs.

Capital improvements: extensions, loft conversions, new kitchens or bathrooms, anything that adds permanent value to the property. Routine maintenance and repairs (fixing a boiler, repainting) do not count.

Incidental costs: valuation fees if required for the disposal.

The more thoroughly you document improvement costs, the lower your taxable gain. Keep receipts from the day you purchase.

Q: Can I deduct mortgage interest from my CGT calculation?

A: No. Mortgage interest is a revenue cost, not a capital cost. It cannot be offset against capital gains. For income tax relief on mortgage interest, see the Section 24 rules which apply to rental income instead.

The 60-Day Reporting Rule

Since April 2020, UK residents who sell a residential property at a gain must report and pay CGT within 60 days of the completion date, not the exchange date. This is done through HMRC's Capital Gains Tax on UK Property service, separate from Self Assessment.

The 60-day clock starts on the date of legal completion. If the deadline falls on a weekend or bank holiday, it extends to the next working day.

Missing the deadline triggers an automatic late-filing penalty of £100 if you are up to 6 months late. Interest also accrues on any unpaid tax from day 61 onwards.

You must still include the gain on your Self Assessment return for the full tax year. Any CGT already paid through the 60-day report is credited against your annual liability.

Q: Do I need to report if I sell at a loss?

A: UK residents do not need to use the 60-day reporting service for a property sold at a loss. However, reporting the loss on your Self Assessment return is advisable, because capital losses can be carried forward and offset against future gains.

Worked Example: Selling a Buy-to-Let

Here is a realistic example for a higher-rate taxpayer selling a buy-to-let apartment:

The effective tax rate on the £80,000 gross profit is 16.3%, not 24%, because the deductions and allowance reduce the taxable amount considerably.

For a basic-rate taxpayer whose total income plus gain stays within the basic-rate band, the same £54,400 taxable gain at 18% would produce a CGT bill of £9,792.

Reliefs That Reduce or Eliminate CGT

Several reliefs can reduce or remove your CGT liability entirely:

Private Residence Relief (PRR): If the property was your main home at any point, you may qualify for partial PRR. The final 9 months of ownership are always exempt regardless of whether you lived there.

Transfers between spouses: Transfers between married couples or civil partners are CGT-free. This can be used to shift ownership to the lower-earning partner before a sale, accessing their lower rate or unused annual exempt amount.

Losses brought forward: Capital losses from previous years can be offset against current gains, pound for pound. This applies across all asset classes, not only property.

Business Asset Disposal Relief (BADR): Only relevant if the property is a genuine business asset (rare for standard buy-to-let properties). The rate is 14% for 2025/26 and rises to 18% for 2026/27, with a £1 million lifetime limit.

For most buy-to-let investors, the practical strategies are: use joint ownership to double the annual exempt amount, deduct every allowable cost meticulously, and time sales across tax years if disposing of multiple properties.

Q: Can I avoid CGT by putting my buy-to-let in a limited company?

A: Limited companies do not pay CGT. They pay corporation tax (currently 25%) on property disposal gains instead. Whether this is more tax-efficient depends on your personal circumstances, including how you extract profits. See our guide to buying through a limited company for the full comparison.

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The Bottom Line

CGT on property is not as painful as the headline rates suggest, once you factor in allowable deductions, the annual exempt amount and joint ownership. The trap is the 60-day reporting deadline. Miss it and you face penalties on top of the tax itself. Document your costs from day one, understand which rate band applies, and file on time.

This article is for general information only. Rothmore Property does not provide tax, legal or financial advice. Capital gains tax rules are subject to change and individual circumstances vary. Always consult a qualified tax adviser before making decisions based on the information in this guide.