When CGT applies to property
Capital gains tax is a tax on profit, not on the sale price. It arises when you dispose of a chargeable asset at a gain. For property, the most common disposals that trigger CGT are: selling a buy-to-let or investment property, selling a second home or holiday home, selling an inherited property that you did not use as your own main residence, and gifting or transferring property to someone other than your spouse or civil partner.
The tax does not apply to your only or main home in most cases, because of Private Residence Relief (PRR). PRR exempts the gain made during the period the property was your main residence, plus the final nine months of ownership regardless of whether you were living there at the end. If you lived in the property throughout the entire period you owned it, PRR typically wipes out the CGT liability entirely.
You also do not pay CGT at the point of inheriting a property. The estate may pay inheritance tax, but the beneficiary inherits at the market value at the date of death. CGT only arises when the beneficiary later sells, and it is calculated on any gain above that inherited base value.
CGT rates on UK residential property (2024/25)
The rate depends on whether the gain falls within your remaining basic-rate income tax band.
| Taxpayer position | CGT rate on residential property |
|---|---|
| Gain falls within remaining basic-rate band | 18% |
| Gain exceeds remaining basic-rate band (higher or additional rate) | 24% |
| Non-UK residents (UK residential property) | 18% or 24% (same rates apply) |
The taxable gain is added to your income to determine which rate(s) apply. A large gain can straddle both rates, with part at 18% and the rest at 24%.
How to calculate your CGT on a property sale
Work through these steps to arrive at your taxable gain.
Step 1: establish the disposal proceeds
This is normally the sale price. For gifts or transactions below market value between connected persons, HMRC uses the market value at the date of disposal instead.
Step 2: deduct the base cost
The price you paid for the property originally (or the probate value if inherited).
Step 3: deduct allowable costs
Stamp duty paid on acquisition, legal and agent fees on purchase and sale, and capital improvements such as extensions, loft conversions or a new kitchen (but not routine maintenance or decoration).
Step 4: apply any reliefs
Deduct Private Residence Relief for any periods the property was your main home, and Letting Relief if applicable (now limited to periods of shared occupancy).
Step 5: deduct the annual exempt amount
£3,000 for individuals in 2024/25. This is a use-it-or-lose-it allowance and cannot be carried forward.
Step 6: apply the rate(s)
Tax the remaining gain at 18% for the portion within your remaining basic-rate band and 24% above that. Add the gain to your income to find where it falls.
Illustrative CGT calculation on a buy-to-let sale
Based on a higher-rate taxpayer selling a property bought for £150,000 and sold for £260,000.
| Item | Amount |
|---|---|
| Sale price | £260,000 |
| Less: original purchase price | -£150,000 |
| Less: stamp duty on purchase | -£1,500 |
| Less: legal fees (purchase and sale) | -£3,500 |
| Less: loft conversion (capital improvement) | -£18,000 |
| Gross gain | £87,000 |
| Less: annual exempt amount (2024/25) | -£3,000 |
| Taxable gain | £84,000 |
| CGT at 24% (higher-rate taxpayer) | £20,160 |
This is illustrative only. Actual figures depend on individual costs, reliefs and income. Seek professional advice for complex disposals.
Reliefs and deductions that reduce CGT
- Private Residence Relief: eliminates CGT on any period the property was your only or main home, plus the final nine months of ownership.
- Annual exempt amount: £3,000 per individual in 2024/25 (reduced from £12,300 in 2022/23). Cannot be carried forward.
- Allowable acquisition costs: stamp duty, legal fees, surveyor fees paid when buying.
- Allowable disposal costs: estate agent fees, legal fees and advertising costs on the sale.
- Capital improvements: cost of works that add to the value or change the nature of the property (extensions, conversions, new heating systems), but not routine repairs or redecoration.
- Capital losses: losses on the disposal of other chargeable assets can be offset against property gains in the same or future tax years.
- Spousal or civil partner transfers: transferring property between spouses or civil partners is CGT-neutral and allows use of both partners' annual exempt amounts and basic-rate bands on a subsequent sale.
60-day reporting and payment deadline
If you owe CGT on UK residential property, you must report the gain and pay any tax due to HMRC within 60 days of the completion date, using the CGT on UK Property online service (a separate process from your annual self-assessment tax return). Missing this deadline triggers automatic late-filing penalties starting at £100, plus interest on unpaid tax. If you also complete a self-assessment tax return, you still need to include the disposal on your return for the relevant tax year, but the 60-day payment date remains the critical deadline for settling any liability.
Inherited property and CGT
When you inherit a property, the base cost for CGT purposes is the probate value: the market value of the property at the date of the deceased's death. You do not pay CGT at the point of inheritance, and any gain or loss that occurred during the deceased's period of ownership is wiped out for CGT purposes.
If you then sell the inherited property quickly at or near the probate value, the gain may be small or nil. If the property increases in value between the date of inheritance and your sale, CGT applies to that increase, less allowable costs and your annual exempt amount.
If you move into an inherited property and make it your main residence, Private Residence Relief begins to accrue from the date you take up residence. The proportion of the gain covered by PRR depends on how long you lived there as a proportion of your total period of ownership (from the date of death). Getting specialist tax advice before selling an inherited property is strongly recommended.