If you sell a property that isn’t your main home, you may need to pay Capital Gains Tax (CGT) on the profit. With increasing focus from HMRC and tighter reporting rules, it’s more important than ever to understand what you owe and how to plan ahead.

What is Capital Gains Tax?

Capital Gains Tax is charged on the profit (gain) you make when you sell or dispose of a property. It is not based on the sale price alone, but on the increase in value from when you bought it.

Gain = Sale Price – Purchase Price – Allowable Costs

Allowable costs can include:

• Stamp Duty paid on purchase
• Legal and estate agent fees
• Costs of capital improvements (e.g. extensions, new kitchens)

CGT Rates on Residential Property

For UK residential property (that is not your main residence), the current CGT rates are:

• 18% for basic rate taxpayers
• 24% for higher and additional rate taxpayers

Your tax band depends on your total income plus the gain.

Annual CGT Allowance

Each individual has an annual CGT allowance (currently £3,000). This means:

• Only gains above £3,000 are taxable
• Couples can potentially use £6,000 combined if the property is jointly owned

When Do You Not Pay CGT?

You may not pay CGT if:

• The property is your main residence (Private Residence Relief applies)
• Your total gain is below the annual allowance
• You transfer property to a spouse or civil partner (usually no CGT)

Reporting and Payment Deadline

If CGT is due on a UK residential property sale:

• You must report it to HMRC within 60 days of completion
• The tax must also be paid within this timeframe

Missing this deadline can result in penalties and interest.

Example

You bought a rental property for £150,000 and sold it for £250,000.

• Gain = £100,000
• Less costs (say £10,000) = £90,000
• Less allowance (£3,000) = £87,000 taxable

If you are a higher-rate taxpayer:

• CGT = £87,000 × 24% = £20,880

Ways to Reduce Your CGT Bill

There are several legitimate ways to reduce CGT:

• Use both spouses’ allowances by transferring ownership before sale
• Deduct all allowable costs properly
• Time the sale to fall in a lower income year
• Consider incorporation or restructuring (with professional advice)

Final Thoughts

CGT on property can be significant, but with the right planning, you can reduce the impact and stay compliant with HMRC rules.

If you are thinking of selling a property, it is always best to get advice before you complete the sale — not after.

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