Capital Gains Tax on Residential Property in the UK: What You Need to Know

What Is Capital Gains Tax on Residential Property?

Capital Gains Tax is a tax you pay on the profit when you sell or dispose of a residential property that has increased in value.

Unlike income tax, CGT is only payable on the profit you make from the sale, not the total amount you receive.

The key properties that fall under CGT include second homes and rental properties — your main residence is typically exempt due to Private Residence Relief, unless there are periods when you did not live there.

Capital Gains Tax Rates for Residential Property in the UK (2024)

The Capital Gains Tax rates vary based on your income tax band and the type of asset you are selling. Below, we break down the CGT rates for different individuals and asset classes in the UK for 2024.For the tax year ended 5th April 2025 capital gains tax rates are as follows:

The rate of Capital Gains Tax for residential property in the UK is currently 18% at the basic rate and 24% at the higher rate.

In addition to the rates noted above, the amount of CGT that is paid at the basic rate and / or higher rate will also be dependent on a number of factors. It can be a common mistake to think that a basic rate taxpayer will pay CGT at the basic rate on all capital gains. See our example on our dedicated Capital Gains Tax Rates UK page to find out more.

There are also a number of exemptions, reliefs and allowances that can reduce the amount of CGT that is payable when you sell or give away a residential property.

For example, if you have lived in the property as your main home for a time, you will more than likely be entitled to Principle Private Residence ("PPR") relief when you sell the property.

If you only lived there for part of the time that you owned it, you’ll still be entitled to a proportion of PPR relief which may reduce the Capital Gains Tax that may be due. There may also be ways to extend the amount of relief that you can claim. This is a complex area of taxation and we recommend that you seek advice on such matters.

In most cases, you will also be eligible for a tax-free allowance of £3,000 per person per year. This is called the Annual Exempt Amount ("AEA"), which means that if the total of your gains fall below £3,000 in the tax year, you may not need to pay any CGT at all.

If you made a loss when selling an asset, this can be reported to HMRC and if the loss is allowable, you will be able to set this loss against other capital gains in the tax year or i the following tax years.

A loss is not usually allowable if:

• You’ve sold or gifted the asset to a spouse or civil partner

• You’ve sold or gifted the asset to a family member

• You’ve sold or gifted the asset to a connected person (this can be complex – contact us for more information)

How to Calculate Capital Gains Tax on Residential Property Sales

To calculate your CGT liability, you need to determine the profit you’ve made from the residential property sale. This will depend on a number of factors, including:

• The amount you bought the property for (or in some circumstances the market value of the asset when you acquired it),

• The amount you sold the property for (or in some circumstances the market value of the asset when you sold it or gave it away),

• Any costs associated with buying or selling the property, such as estate agent fees or legal fees, and

• Any improvements you have made to the asset during the period of ownership.

There are a number of other expenses which may be included in the capital gains tax computations depending on your individual circumstances.

As the CGT legislation governing residential property sales is complex, we recommend discussing your situation with a qualified advisor so that you can be sure of the accuracy of your computations and that you are paying as little CGT as possible while still complying with the rules.

Reporting Capital Gains Tax on Residential Property

Once you have calculated your CGT liability, it’s crucial to report it correctly to HMRC.

You need to report and pay your CGT within 60 days of completing the sale of residential property.

Failing to meet this deadline can result in penalties and interest charges, so it’s important to stay compliant.

Reporting can be done through the HMRC CGT Return Online Service or by a paper CGT Return if you are unable to register for the online service.

If you usually file a Self-Assessment Tax Return, you will also need to include details of the sale of the residential property in your tax return for the year during which the property was sold.

If you’re unsure how to proceed, seeking the help of a tax advisor can ensure that everything is reported accurately and on time.

We have filed thousands of CGT Returns for our clients - feel free to drop us an email to discuss your circumstances and how we can help you to report your CGT Return on time - info@capitalgainstax.co.uk

Frequently Asked Questions About Capital Gains Tax on Residential Property

Q: Is my main home subject to Capital Gains Tax?

A: Your main residence is usually exempt from CGT, thanks to Private Residence Relief. However, if you’ve rented out part of your home, used part of your home for business purposes or if you've had any periods during your ownership where you did not live in the property as your main home, then some of the gain may still be taxable.

Q: How much is the CGT allowance for 2024?

A: The annual CGT allowance for 2024 is £3,000 for individuals and £1,500 for trusts. Couples can combine their allowances for up to £6,000.

Q: Can I avoid Capital Gains Tax by reinvesting in another property?

A: Unfortunately, the UK does not currently offer a rollover relief for reinvesting in residential property, unlike some other countries. However, careful planning and the use of available reliefs can help minimise your tax.

Q: What expenses can I deduct when calculating Capital Gains Tax on residential property?

A: You can deduct certain allowable expenses, including legal fees, estate agent fees, stamp duty, and the cost of improvements made to the property (not regular maintenance). These deductions help reduce your overall taxable gain.

Q: How long do I have to live in a property for it to qualify as my main residence and be exempt from CGT?

A: There is no fixed minimum period, but HMRC will consider factors such as how long you lived there, whether it was genuinely your home, and if you made it your primary residence. The more evidence you have that it was your main home, the better. This is a very complex area of the legislation and requires careful consideration - speak to an expert if you are unsure.

Q: If I gift a property to a family member, do I still need to pay Capital Gains Tax?

A: Yes, gifting a property is still considered a disposal for CGT purposes. You would need to calculate CGT based on the market value of the property at the time of the gift, unless it is gifted to your spouse or civil partner.

Q: Can I get relief if I sell a property that I inherited?

A: Yes, you can still qualify for the Annual Exemption Allowance and deduct allowable expenses. The gain will be based on the property's market value at the time of inheritance, not the original purchase price.

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