Capital gains tax on property is one of those areas where the gap between what people think the rules are and what the rules actually are can be quite costly. We see it regularly — landlords who assume their main home is automatically exempt when it isn’t entirely, or investors who’ve miscounted the months since they last lived in a property and end up with a larger bill than expected.

The numbers involved are significant. HMRC’s own data shows that in the 2024/25 tax year, residential property disposals reported via the CGT on UK Property service generated £10.3 billion in gains and a tax liability of £2.2 billion — the highest figures since the service launched in April 2020. That’s a lot of money flowing through a process that many people navigate without professional guidance.

This post sets out the current rates and exemptions for 2026/27, the reliefs worth understanding, and the mistakes we see most often. It’s not a substitute for advice on your specific situation, but it should help you ask the right questions.

Capital gains tax on property arises when you dispose of a UK residential property that isn’t — or wasn’t exclusively — your only or main home. That includes buy-to-let properties, second homes, holiday lets, and inherited properties you’ve held for a while before selling.

“Dispose” doesn’t only mean selling. Giving a property away, transferring it into a trust, or exchanging it as part of another transaction can all trigger a CGT event. Transfers between spouses and civil partners are generally exempt, but that doesn’t mean tax disappears — it’s deferred to the eventual sale.

The gain itself is calculated as the sale proceeds minus the original acquisition cost, plus allowable improvement costs (not routine maintenance), plus buying and selling costs such as solicitors’ fees and stamp duty paid on purchase. It sounds straightforward, but getting the figures right — particularly on a property held for many years — takes more care than most people expect.

Inherited properties use the market value at the date of death as the acquisition cost, not whatever the original owner paid. That distinction matters, and it’s worth establishing the probate valuation carefully if you’re planning to sell.

For the 2026/27 tax year, the CGT rates on residential property are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. These rates are unchanged from the previous year.

Whether you pay 18% or 24% — or a blend of both — depends on where the gain sits relative to your remaining basic-rate band. If you’ve already used most of your income tax basic-rate band through salary or other income, more of the gain will be taxed at 24%.

Every individual also has an annual exempt amount of £3,000 for 2026/27. That allowance is deducted from the total gain before tax is calculated. It’s worth noting that £3,000 is considerably lower than it was just a few years ago — the exemption was £12,300 as recently as 2022/23 — so the practical impact for most sellers is modest. Couples who own property jointly each have their own exemption, which remains one of the more straightforward ways to reduce a combined bill.

The gain is added to your other income for the year when working out which rate applies, so the timing of a sale — particularly around the tax year end in April — can sometimes affect the total liability. That’s not a reason to rush or delay a sale on tax grounds alone, but it’s worth factoring into the conversation if you have flexibility.

The most valuable relief available is private residence relief (PRR). If the property was your main home for part of your ownership, the proportion of the gain relating to that period is exempt from CGT. The final nine months of ownership are also treated as a period of occupation for most people — even if you’d already moved out — which can make a material difference on a property you lived in before letting it out.

There is an extended final period of 36 months for people who’ve moved into a care home, which is worth flagging if that’s relevant to your situation.

Lettings relief is another relief that exists, but its scope has been significantly narrowed. Since April 2020, it only applies where the owner and tenant shared occupation of the property at the same time — in practice, this means lodger arrangements rather than full buy-to-let. If you let a property entirely, lettings relief no longer applies, and we do see people assuming it does.

Where a property is held jointly, both owners must consider their own CGT position individually. Unmarried co-owners who want to adjust the split of income or gains need to take separate legal steps — the assumption that a 50/50 split applies by default doesn’t hold in all cases.

One of the most practically important things to know about capital gains tax on property is the reporting deadline. If you sell a UK residential property that generates a taxable gain, you must report it to HMRC and pay any tax owed within 60 days of completion. This applies even if you normally file a self-assessment return.

Sixty days sounds like a reasonable window, but completions often happen quickly, solicitors don’t automatically flag the CGT obligation, and people are usually preoccupied with the move itself. By the time someone thinks to ask about tax, the deadline can already be close — or passed.

Late filing triggers an automatic £100 penalty, with further daily charges if it remains outstanding. The tax itself also accrues interest from the due date. In our experience, the sellers who fall foul of this deadline aren’t being careless — they simply didn’t know it existed.

If you’re going through conveyancing now, our straightforward advice is to speak to an accountant before completion, not after. Having the figures ready means the 60-day return can be filed promptly rather than scrambled together under time pressure.

Non-UK residents selling UK property face similar reporting requirements, though the rules around their CGT calculation differ in some respects — specifically in how gains before April 2015 are handled.