Selling a second home in 2026: capital gains tax explained

Selling a second home is one of the simpler tax events on paper and one of the most expensive ones to get wrong in practice. The rates have moved a few times in recent years and the reporting rules have tightened. Here is where things stand for the 2026/27 tax year.

The 2026/27 numbers

Residential property gains for UK residents are taxed at two rates:

• 18 per cent on the part of the gain that falls within your unused basic-rate income tax band
• 24 per cent on anything above the basic-rate band
• Annual Exempt Amount: £3,000 per person (down from £6,000 in 2023/24 and £12,300 in 2022/23)
• Couples can combine allowances if the property is jointly owned

What counts as the gain

The gain is the sale price minus the original purchase price, minus allowable costs of buying, selling and improving (not maintaining) the property.

Allowable costs include legal fees, surveyor fees, stamp duty paid on purchase, estate agent commission on sale, and capital improvements such as a loft conversion or new extension. Routine repairs and replacements do not reduce the gain; they were income-side deductions during the rental.

The 60-day deadline

UK residents disposing of UK residential property at a gain have to file a return and pay the tax due within 60 days of completion. The reporting is done via the HMRC UK Property Disposal service.

This is the rule people miss most often. The deadline is from the completion date, not the end of the tax year. Late filing penalties start at £100 and escalate. The Self Assessment return later in the year still has to include the same gain (with the on-account payment credited).

Private Residence Relief on a former home

If the property was ever your only or main residence, Private Residence Relief (PRR) exempts the gain attributable to that period. The final 9 months of ownership always count as residence even if you have moved out, on the assumption you cannot always sell on the day you leave.

There is also lettings relief, but only in narrow circumstances since 2020: you have to be sharing occupation with the tenant. The broader version of lettings relief that some older guides mention was abolished from April 2020.

Other useful reliefs and rules

Worth knowing about, depending on the situation:

• Transfer to a spouse or civil partner is at no gain no loss, so jointly owning before sale uses both allowances
• Gifts to children are at market value for CGT and trigger a chargeable gain even if no money changes hands
• Losses on other capital assets in the same year (or carried forward) can offset the property gain
• Non-residents have a separate CGT regime for UK property and must report all disposals within 60 days even where no tax is due
• The CGT base cost of a non-resident's UK residential property is the value at 5 April 2015 (or original cost if later) for properties held before that date

Two opinions, plus one warning

The squeeze on the annual exempt amount has moved CGT from a marginal concern to a real one. £12,300 ten years ago vs £3,000 today is a 75 per cent reduction in shelter on every disposal. Most landlords selling a property now will have some tax to pay.

Timing the spousal transfer matters. To get two annual exempt amounts on a sale, the property needs to be in joint names well before the contract is signed; HMRC are entitled to challenge transfers that look like they were done purely to access the relief.

Watch the band interaction with other income. A salary that uses up the full basic-rate band means the entire property gain is at 24 per cent. A redundancy year or a sabbatical can drop a chunk of the gain into the 18 per cent band; this is rarely planned for, and it should be.

Do I pay CGT if I sell my only home?

Usually not. Private Residence Relief normally covers a sole or main residence for the whole period of ownership. The relief tapers if you owned the property as your home and as a second property at different times, or if part of it was used exclusively for business.

What if I make a loss on the sale?

Capital losses are reported in the same way as gains and can be offset against gains in the same tax year or carried forward indefinitely against future capital gains. Property losses cannot be offset against income.

Are there higher rates for trusts?

Yes. Since 30 October 2024, trustees of most trusts pay CGT at 24 per cent on all assets (not just residential property), and the trustees' annual exempt amount is £1,500 (half the individual £3,000).