Capital Gains Tax on Residential Property

Capital Gains Tax may apply when you dispose of a residential property that is not fully covered by Private Residence Relief.

This can include buy-to-let properties, second homes and other residential property that has not been your only main residence throughout the period of ownership.

CGT can also arise where your main home has been used for letting or business purposes, or where other circumstances mean that only part of the gain qualifies for relief.

The tax position depends on factors such as how the property was used, how long you owned it, the amount of the gain and which reliefs may be available.

It is therefore important to establish the potential CGT position before completing a property sale.

Care Accountancy can review your property history and help determine whether Capital Gains Tax may apply.

Private Residence Relief can reduce or eliminate Capital Gains Tax when you sell a property that has been your main residence.

Where you have occupied a property as your main home for the relevant period, the qualifying period may benefit from Private Residence Relief.

The final nine months of ownership can generally qualify for relief, subject to the relevant conditions. A longer final period can apply in certain circumstances.

The position can become more complicated where you have rented out part or all of the property, used part of it for business, or had periods when it was not your main home.

Married couples and civil partners can generally only have one main residence for Private Residence Relief purposes at any one time.

Care Accountancy can review your ownership and occupation history to help establish how Private Residence Relief may apply.

Selling a buy-to-let property or second home can result in a Capital Gains Tax liability if the property has increased in value since it was acquired.

Unlike a qualifying main residence, an investment property will not normally receive full Private Residence Relief.

The amount of CGT payable depends on the gain, allowable costs, available losses and reliefs, your taxable income and the applicable Capital Gains Tax rates.

If a property was previously your main residence and was later rented out, the calculation can be more complex because different periods of ownership may receive different tax treatment.

Accurate records of the purchase price, improvement costs, acquisition expenses and disposal costs can be important when calculating the taxable gain.

Care Accountancy can help calculate the potential gain and assess the reliefs that may be available.

Your property gain is generally based on the difference between the disposal proceeds and the allowable cost of acquiring and disposing of the property.

Allowable costs can include the purchase price and certain costs associated with buying and selling the property.

Qualifying improvement expenditure may also be taken into account where it has enhanced the value of the property and meets the relevant conditions.

Where the property has been your main residence for only part of the ownership period, the gain may need to be apportioned to establish the amount potentially subject to CGT.

Capital losses and applicable reliefs may further reduce the taxable gain.

For 2026/27, individuals have an Annual Exempt Amount of £3,000. CGT is generally only payable on overall gains above this allowance after relevant deductions and reliefs.

The 60-day reporting rule is particularly important when disposing of UK residential property.

Where Capital Gains Tax is due on a UK residential property disposal, the disposal generally needs to be reported to HMRC and the tax paid within 60 days of completion.

The deadline is based on the completion date of the property transaction, so it is important to act promptly after completion.

This reporting requirement can apply even where the disposal will ultimately also need to be included on a Self Assessment tax return.

Failure to report and pay on time can result in penalties and interest, depending on the circumstances.

Care Accountancy can help calculate the gain, prepare the necessary information and assist with your reporting obligations.

If you have a taxable gain from the disposal of UK residential property, you may need to report the disposal to HMRC and pay the CGT due within the required deadline.

Before reporting the disposal, it is important to establish the correct gain and consider allowable costs, losses and available reliefs.

You should also consider whether Private Residence Relief or another applicable relief changes the amount that is ultimately taxable.

The amount of tax payable will depend on your taxable income, taxable gain and the applicable CGT rates for the tax year.

For the 2026/27 tax year, the individual CGT rates are 18% and 24%, with the applicable rate depending on your income and the amount of gain falling within the relevant bands.

Care Accountancy can help you calculate the liability, understand your reporting responsibilities and deal with the relevant HMRC requirements.