Capital gains tax on selling a second home or buy-to-let (UK, 2026/27)

Capital gains tax on a second home is 18% or 24% in 2026/27

You pay Capital Gains Tax on the profit from selling a second home or buy-to-let at 18% on the part of the gain that fits in your unused basic rate band and 24% on the rest. There is no separate, higher rate for residential property any more.

According to GOV.UK, from 6 April 2026 higher and additional rate taxpayers pay 24% on gains. Basic rate taxpayers work out their rate in four steps: take taxable income (income less the Personal Allowance), take total gains, deduct the tax-free allowance from the gains, and add what is left to taxable income. Any part within the £37,700 basic rate band is taxed at 18% and any part above it at 24%.

Rental profit counts as taxable income, so a year of rent from the property you are selling uses up basic rate band before the gain does. According to HMRC's Capital Gains Manual (CG21204), the basic rate band for Capital Gains Tax is worked out as if you were not a Scottish or Welsh taxpayer, so Scottish taxpayers use the UK £37,700 band.

The £3,000 tax-free allowance comes off the gain first

Each person gets a Capital Gains Tax allowance of £3,000 for 2026/27, called the annual exempt amount, and only gains above it are taxed. It was £12,300 as recently as 2022/23, so a sale that was tax-free a few years ago may not be now.

According to GOV.UK, the allowance is £3,000 for individuals in 2024/25, 2025/26 and 2026/27, and £1,500 for most trusts. You can set it against the gains charged at the highest rate, so it saves 24% (£720) if any of your gain falls above the basic rate band and 18% (£540) if all of it falls within it.

The allowance covers all your gains in the tax year (6 April to 5 April), not each asset. If you sold shares at a £2,000 gain in May, only £1,000 of allowance is left for a property sale in October.

Allowable costs you can deduct from the gain

Your gain is the sale price less the purchase price and the costs of buying, selling and improving the property. Every allowable cost you can prove reduces the tax by 18p or 24p in the pound.

According to GOV.UK, you can deduct estate agents' and solicitors' fees and the cost of improvement works such as an extension, but not normal maintenance such as decorating, and not interest on a loan to buy the property. HMRC's Capital Gains Manual (CG15250) lists the allowable incidental costs of buying and selling as:

• fees of a surveyor, valuer, auctioneer, accountant, agent or legal adviser;
• costs of transfer or conveyance, including Stamp Duty Land Tax;
• costs of advertising to find a buyer or seller;
• costs of a valuation needed for the Capital Gains Tax calculation.

Stamp Duty Land Tax paid when you bought is often the biggest cost people forget. If you have lost the completion statement, the stamp duty calculator gives a figure to check against your solicitor's records. Keep invoices for improvement works too: an extension counts, redecorating does not.

Worked examples: £71,000 gain for a basic rate and a higher rate taxpayer

A buy-to-let bought for £200,000 and sold for £285,000 with £14,000 of buying, selling and improvement costs gives a £71,000 gain and about £15,700 to £16,300 of tax in 2026/27. These figures come from the capital gains tax calculator with a completion date of 15 October 2026.

The £14,000 of costs covers the Stamp Duty Land Tax and legal fees on purchase, the estate agent and solicitor on sale, and an extension. Take away the £3,000 allowance and £68,000 is taxable.

On £40,000 of income, taxable income is £27,430 after the £12,570 Personal Allowance, which leaves £10,270 of the £37,700 basic rate band. Only that slice of the gain gets the 18% rate. A large gain pushes most basic rate taxpayers into 24% on the bulk of it.

A smaller sale can be tax-free: bought for £200,000, sold for £215,000 with £12,000 of costs gives a £3,000 gain, all covered by the allowance, with nothing to report.

Report and pay within 60 days of completion

You must report a UK residential property gain and pay the tax within 60 days of the completion date, using a Capital Gains Tax on UK property account. This deadline does not wait for your Self Assessment return.

According to GOV.UK, the 60-day limit applies to completions on or after 27 October 2021 (it was 30 days from 6 April 2020). You may have to pay interest and a penalty if you report or pay late. A sale completing on 15 October 2026 must be reported and paid for by 14 December 2026.

• No tax to pay: UK residents do not need to report online if total gains are within the tax-free allowance.
• Non-UK residents: must report every sale of UK property or land within the deadline, even with no tax to pay or a loss.
• Self Assessment: if you are already registered, you also include details of the sale in your Self Assessment tax return, according to GOV.UK.
• Joint owners: each owner reports their own gain.

You will need the property address, the dates you acquired it, exchanged contracts and completed, the purchase and sale values, the costs and any reliefs you are claiming. You pay using a 14-character Capital Gains payment reference starting with X, shown in your online account.

Private Residence Relief if the property was once your home

Private Residence Relief removes Capital Gains Tax on the part of the gain that relates to the time a property was your only or main home, plus the last 9 months you owned it. A buy-to-let that you lived in before letting it out usually qualifies for some relief.

According to GOV.UK, you get full relief for the years you lived in the home and for the last 9 months of ownership, even if you had moved out. The final period is 36 months if you only own one home and are disabled or in long-term residential care. Absences can also qualify: up to 3 years for any reason, up to 4 years if you had to work elsewhere in the UK, and any period working abroad, if you lived there before and after.

GOV.UK gives this example. You own a home for 15 years, live in it for 7.5 years and let it for 7.5 years, making a £120,000 gain. Relief covers 8.25 years (7.5 plus the last 9 months), which is 55% of the time, so £66,000 of the gain is tax-free and £54,000 is chargeable.

Put that £54,000 into the capital gains tax calculator for someone with £40,000 of income selling in October 2026: after the £3,000 allowance, £10,270 is taxed at 18% and £40,730 at 24%, for a total of £11,623.80.

If you own two homes you use as residences, you can nominate which is your main home by writing to HMRC within 2 years of each change in your combination of homes, signed by all owners. A married couple or civil partners can have only one main home between them at any time.

Letting Relief now applies only if you lived with your tenant

Letting Relief is limited to periods when you shared the home with a tenant, and it is capped at £40,000. Letting out the whole property after you moved out no longer earns any Letting Relief.

According to GOV.UK, Letting Relief is the lowest of three figures: the Private Residence Relief you get, £40,000, and the chargeable gain from the part you let. A lodger who shares your living space, or children or parents living with you who pay rent, do not count as letting out part of your home at all, so full Private Residence Relief can still apply.

GOV.UK's example: you let a large bedroom that is 10% of your home and make a £75,000 gain. Private Residence Relief covers £67,500 (90%), Letting Relief covers the other £7,500, and you pay no tax.

Transfers between spouses and civil partners are tax-free

You pay no Capital Gains Tax when you give or sell a property, or a share of one, to your husband, wife or civil partner, as long as you were not separated for the whole tax year. That lets a couple use two allowances and two basic rate bands on the eventual sale.

According to GOV.UK, the partner who receives the asset takes over your original cost. Their gain on a later sale is the difference between the value when you first owned it and the sale price, so a transfer moves the gain between you rather than resetting it. They should keep a record of what you paid.

A transfer helps most when one partner pays higher rate tax and the other has little income, because the lower earner's unused basic rate band is taxed at 18% rather than 24%. The receiving partner becomes a legal owner and takes their share of the sale money, so take legal advice before transferring a share of a mortgaged property.

Joint owners each use their own allowance and band

Joint owners each pay Capital Gains Tax only on their own share of the gain, with their own £3,000 allowance and their own basic rate band. For a couple, that can cut the bill by thousands of pounds.

According to GOV.UK, if you dispose of an asset you own jointly with someone else, you pay Capital Gains Tax on your share of the gain, and each owner reports their own gain or loss. Here is the same £71,000 gain owned by one person with £70,000 of income, and then owned 50:50 with a partner who has £18,000 of income, both worked out in the capital gains tax calculator.

Owning the property 50:50 saves £2,656.20: £720 from the second allowance and £1,936.20 from taxing £32,270 at 18% instead of 24%. The lower earner's rental income for the year still counts as income, so run each person's figures with their real income.