The sale of UK residential property is one of the most common triggers for a capital gains tax bill — and one of the most frequently misunderstood. The rules have changed significantly over the past decade: CGT rates on property were increased in October 2024, the main residence exemption was narrowed, and the 60-day reporting requirement now applies to all residential property disposals by UK residents. This guide sets out the current position in 2026 and the planning strategies available.
Capital Gains Tax Rates on Residential Property
Since the Autumn Statement 2024, CGT rates on residential property are:
- 18% for gains falling within the basic-rate band
- 24% for gains falling within the higher-rate band
These rates apply to all UK residential property that does not qualify for full or partial Principal Private Residence (PPR) exemption. They apply regardless of whether the seller is UK resident or non-resident (different rules apply to non-residents — see below).
The basic/higher-rate distinction is determined by adding the taxable gain to your other income in the tax year. If the total falls within the basic-rate band (£50,270 in 2026/27 including the personal allowance, frozen at this level), the lower 18% rate applies to the portion within that band; any gain above the basic-rate threshold is taxed at 24%.
Example: you earn £35,000 in employment income and make a £80,000 taxable property gain. The remaining basic-rate band (£50,270 − £35,000 = £15,270) is taxed at 18%; the remaining £64,730 at 24%.
Principal Private Residence Relief (PPR)
PPR is the exemption that removes the gain on the sale of your main home from CGT. It is one of the most valuable reliefs in the UK tax system.
Full Exemption
If a property has been your only or main residence throughout the entire period of ownership, 100% of the gain is exempt. There is no limit on the amount exempt.
Partial Exemption
If the property has not been your main residence for the entire ownership period, the exempt fraction is:
(Period of main residence + final period) / Total ownership period
The final period is automatically exempt — regardless of whether you are living in the property — provided it was your main residence at some earlier point. Since April 2020, this final period is the last 9 months of ownership (reduced from 36 months pre-April 2014, then 18 months until April 2020).
Letting Periods
If the property was let during part of your ownership period, the letting period does not automatically become chargeable — those periods are simply excluded from the PPR calculation, giving rise to a chargeable proportion of the gain.
Letting relief: prior to April 2020, a letting relief of up to £40,000 per owner (£80,000 per couple) could reduce the chargeable gain further. From April 2020, letting relief is only available where the owner is in shared occupancy with the tenants during the letting period. This change significantly increased the CGT liability for those who let their former main residence while living elsewhere.
Only or Main Residence Election
If you own more than one property that could qualify as a main residence, you can elect which property is treated as such for PPR purposes. The election must be made within two years of first acquiring a combination of qualifying properties. Missing the deadline means HMRC determines which is your main residence on the facts.
Couples can only nominate one main residence between them, even if they each own a property individually.
Reporting Requirements: The 60-Day Rule
Since 27 October 2021, all UK residents who dispose of UK residential property must:
- Report the disposal to HMRC via the online UK Property Reporting Service within 60 days of completion
- Pay any CGT due within the same 60 days (a payment on account)
This is separate from — and additional to — the annual self-assessment tax return. Even if you think you owe no CGT (for example, if PPR applies fully), you may still need to report if HMRC requires it; in practice, if the gain is fully covered by PPR or the annual exemption, no report is required.
The 60-day window starts from the completion date, not the exchange date.
Late filing penalty: £100 for filing between 1 and 6 months late; additional £300 or 5% of the tax (whichever is greater) for delays beyond 6 months and 12 months. Interest also accrues on late payments.
Non-residents: different rules apply. Non-UK residents must report disposals of UK property within 60 days regardless of whether they have a CGT liability, and regardless of their other UK tax obligations. Non-residents have been subject to UK CGT on UK residential property since April 2015.
The Annual CGT Exemption
Every individual has an annual CGT exemption (the "annual exempt amount"), currently £3,000 in 2026/27 — reduced from £12,300 in 2022/23. Only gains above this threshold are taxable.
For a couple selling a jointly owned property, both exemptions are available: £6,000 combined. If you have not used your exemption elsewhere in the tax year (on share sales, for example), this reduces the taxable gain accordingly.
Losses
Capital losses can be offset against capital gains in the same tax year. If losses exceed gains in a tax year, the excess can be carried forward indefinitely to offset future gains.
Important: capital losses must be claimed on your self-assessment tax return. They do not arise automatically. If you have unrealised losses on other assets (shares, for example), crystallising those losses before the end of the tax year and in the same year as a property gain can reduce your CGT liability materially.
There is no mechanism to create a loss — the disposal must actually occur. However, if you have existing losses on a portfolio, co-ordinating the timing of a property sale with crystallisation of those losses is worth considering.
The Effect of Letting History
If you have let your property for part of the ownership period, the gain is split proportionally between the let and occupied periods. Only the occupied period (plus the final 9 months) qualifies for PPR.
Example: you owned a property for 10 years, lived in it for 6 years, then let it for 4 years. On sale:
- PPR fraction: (72 months + 9 months final period) / 120 months = 67.5% exempt
- Chargeable fraction: 32.5% of the total gain
The final 9 months' automatic exemption is helpful but may not fully cover the letting period in all cases.
Planning Strategies
Utilising Both Annual Exemptions (Spouse Transfer)
If a property is owned solely by one spouse or civil partner, transferring a share to the other before sale uses both annual CGT exemptions on the disposal. Transfers between spouses and civil partners are made at no gain/no loss — so there is no CGT on the transfer itself. The property can then be sold with both parties using their £3,000 exemption, saving £3,000 × 24% = £720 (or more at lower rates).
Note: the transfer must be a genuine transfer of beneficial ownership, not a paper arrangement. The same rule applies to using both spouses' basic-rate bands on the gain.
Timing the Sale Across Tax Years
CGT is assessed on a tax year basis. If exchange of contracts occurs in one tax year and completion in the next, the gain is taxed in the year of completion (not exchange). Completing in the new tax year gives access to the new year's annual exemption and potentially a fresh basic-rate band if income varies year to year.
This strategy requires care: most sellers and buyers want completion as quickly as possible after exchange, and delaying solely for tax reasons may not be practically achievable.
Establishing Non-UK Residency
Gains on the disposal of overseas property (not UK property) arising during a period of non-UK residence are generally not subject to UK CGT. However, for UK property, the rules changed in April 2015: non-UK residents are subject to UK CGT on gains from UK residential property regardless of their residence status.
However, a year of departure from the UK (if you are genuinely non-UK resident) can still affect the overall CGT calculation for non-UK property sold in that year. This is a complex area requiring specialist advice.
Furnished Holiday Lettings (FHL)
Prior to April 2025, furnished holiday lettings enjoyed special CGT treatment — notably, access to Business Asset Disposal Relief (BADR), which reduced the CGT rate to 10%. The FHL regime was abolished from April 2025. Properties that previously qualified as FHLs are now treated as ordinary residential letting properties for all tax purposes. This is a significant change for those who relied on BADR on the sale of FHL properties.
Non-UK Resident Sellers
Non-UK residents selling UK residential property face:
- UK CGT on gains since 6 April 2015 (for older properties, only post-April 2015 gains are subject to UK CGT — or an election to use the market value at that date as the base cost)
- A mandatory 60-day report to HMRC in all cases
- The same CGT rates as UK residents (18%/24% on residential property gains), with tax calculated on gains since 6 April 2015 (or 6 April 2019 for non-residential and indirect disposals)
There is no general obligation on a buyer to withhold tax from the price paid to an individual non-resident seller of UK residential property; instead, the non-resident seller is responsible for reporting and paying any CGT via the 60-day return.
Non-resident sellers in the UAE, Thailand, or other zero/low-tax jurisdictions may be surprised to find a UK CGT liability arising on UK property disposal. The double taxation agreement between the UK and the seller's country of residence may provide some relief, though many DTAs give the UK the primary right to tax gains on UK land.
How Global Investments Can Help
A property sale is often the largest single financial transaction many people undertake, and the CGT implications deserve careful planning — ideally beginning well before the sale is agreed. Global Investments works with UK and internationally mobile clients to structure property disposals in the most tax-efficient manner available.
We can help you assess your PPR position, identify timing opportunities, model the impact of using both spouses' exemptions, and consider how a property sale interacts with your wider income and gains position in the relevant tax year.
Property values are not guaranteed to rise. Tax rules change, and the information in this article reflects the position as at June 2026. This article is provided for general information only and does not constitute tax or financial advice. Always seek qualified professional advice before making a property disposal.
To discuss your property sale or portfolio planning, please contact our team.
This article is for general information only and does not constitute financial, legal or tax advice. Rules, prices and regulations change; verify current requirements with a qualified adviser before acting.