Capital Gains Tax When Selling Your Home: UK 2026 Guide

Introduction: Do You Need to Pay Capital Gains Tax When You Sell Your Home?

For the majority of homeowners in the UK, selling your main home does not trigger a Capital Gains Tax bill. A relief called Private Residence Relief removes the tax liability entirely for sellers who have lived in the property as their only or main home throughout their period of ownership. If that applies to your situation, you will not pay Capital Gains Tax and in most cases you will not even need to report the sale to HMRC.

However, not every home sale is straightforward. If you have let out part or all of your property, if you own more than one home, if you have used part of the property exclusively for business purposes, or if you have not lived in the property for the entire time you owned it, Capital Gains Tax may apply to some or all of the gain you make on the sale.

Understanding where you stand before you sell is far better than discovering a tax liability after completion. This guide explains what Capital Gains Tax is, how it applies to residential property sales in the UK in 2026, the current rates and the tax-free allowance, the reliefs available to sellers, how to calculate your gain, and how and when to report and pay any tax owed.

If you are preparing to sell your home, use the free Cost Saving Calculator on YooSell to understand the full financial picture of your sale before you list.

What Is Capital Gains Tax

Capital Gains Tax is a tax charged on the profit you make when you sell or dispose of an asset that has increased in value. It is not a tax on the full sale price. It is a tax only on the gain, which is the difference between what you paid for the asset and what you receive when you sell it.

Capital Gains Tax applies to a wide range of assets including shares, investment portfolios, business assets, and property. For the purposes of this guide, the focus is on its application to residential property sales in England and Wales.

What Counts as a Disposal

A disposal is not limited to a conventional sale. For Capital Gains Tax purposes, the following all count as disposals that could trigger a liability:

• Selling a property

• Gifting a property to another person, other than to a spouse or civil partner

• Transferring a property as part of a divorce settlement in certain circumstances

• Receiving insurance proceeds after a property is destroyed

What Capital Gains Tax Is Charged On

Capital Gains Tax is charged on the chargeable gain. The chargeable gain is calculated by deducting the original acquisition cost from the sale proceeds, after subtracting allowable costs and applying any available reliefs. You do not pay tax on the full sale price, only on the profit above your base cost.

When Capital Gains Tax Does Not Apply to a Property Sale

Capital Gains Tax does not apply to the sale of your only or main home if it qualifies fully for Private Residence Relief. This covers the vast majority of straightforward owner-occupied home sales. The sale of your main residence is not automatically reportable to HMRC where the gain is fully covered by Private Residence Relief, unless you are a non-UK resident seller.

Capital Gains Tax Rates on Residential Property in 2026

The rate of Capital Gains Tax you pay on a residential property gain depends on your taxable income in the year of the sale. There are two rates that apply to residential property gains in the 2025/26 tax year, which runs from 6 April 2025 to 5 April 2026.

The Current CGT Rates for Residential Property

The Capital Gains Tax rates on residential property gains for 2025/26 are:

• 18 percent on gains that fall within your unused basic rate income tax band

• 24 percent on gains that fall above the basic rate band

These rates apply after deducting the annual exempt amount from your total chargeable gains for the year.

How the Rate Is Determined

Your Capital Gains Tax rate is not simply based on whether you are a basic or higher rate income taxpayer. The taxable gain is stacked on top of your taxable income for the year. The slice of the gain that fits within your unused basic rate band is taxed at 18 percent. Any portion of the gain that exceeds the basic rate band is taxed at 24 percent.

Understanding the Basic Rate Band

The basic rate income tax band for 2025/26 runs from the personal allowance threshold up to fifty thousand two hundred and seventy pounds of taxable income. If your total taxable income for the year is, for example, thirty thousand pounds, you have twenty thousand two hundred and seventy pounds of unused basic rate band remaining. The first twenty thousand two hundred and seventy pounds of your chargeable gain would be taxed at 18 percent, and any amount above that at 24 percent.

Why Income Affects Your CGT Rate

Capital Gains Tax on residential property does not operate in a separate silo from your income tax position. The two interact directly. A seller who has significant income in the year of the sale will have a smaller or no unused basic rate band, meaning a greater portion of the gain is taxed at 24 percent. A seller with low income in the year of the sale may benefit from a larger unused basic rate band and pay a greater portion of their gain at the lower 18 percent rate.

The Annual Exempt Amount

Every individual has an Annual Exempt Amount, also called the Annual Exempt Amount or AEA, which is a tax-free allowance for capital gains. You can make gains up to this amount each tax year before Capital Gains Tax becomes payable.

The 2025/26 Annual Exempt Amount

For the 2025/26 tax year, the Annual Exempt Amount is three thousand pounds per individual. This has fallen sharply from twelve thousand three hundred pounds in 2022/23 and six thousand pounds in 2023/24. The reduction means that sellers who might previously have paid little or no Capital Gains Tax on a modest gain may now face a tax liability.

How the Annual Exempt Amount Works for Jointly Owned Property

If you own a property jointly with a spouse or civil partner and both of you are on the title, both of you make a disposal when the property is sold. Each of you is entitled to a separate Annual Exempt Amount. For a jointly owned property sold in 2025/26, the combined tax-free allowance is six thousand pounds before any Capital Gains Tax is payable.

The Annual Exempt Amount Cannot Be Carried Forward

If you do not use your Annual Exempt Amount in a given tax year, it is lost. It cannot be carried into the next tax year and cannot be transferred to another person. This is relevant for sellers who have flexibility about when they complete a sale and who might benefit from timing the disposal to make the most effective use of the allowance.

Private Residence Relief: The Most Important Relief for Home Sellers

Private Residence Relief is the most significant Capital Gains Tax relief available to residential property sellers. It exempts the gain on a property that has been your only or main home throughout your period of ownership from Capital Gains Tax entirely.

When Private Residence Relief Covers the Full Gain

If the property you are selling has been your only or main home for the entire period you have owned it, Private Residence Relief covers one hundred percent of the gain. You pay no Capital Gains Tax on the sale. In most cases you also do not need to report the disposal to HMRC.

For this to apply in full, the following conditions must be met:

• The property was your only or main residence throughout the ownership period

• You did not rent out any part of the property, other than under the rent-a-room scheme within HMRC's limits

• You did not use any part of the property exclusively for business purposes

• The grounds of the property do not exceed half a hectare, or a larger area that is reasonably required given the size of the house

When Private Residence Relief Applies Only in Part

If any of the following apply to your situation, Private Residence Relief may cover only a portion of the gain, and Capital Gains Tax may be payable on the remainder:

• You did not live in the property as your main home for the entire period of ownership

• You rented out part or all of the property during your ownership

• Part of the property was used exclusively and regularly for business purposes

• The property was purchased with the intention of making a profit rather than as a home

In these cases, the relief is calculated proportionally. The gain is apportioned between the period of qualifying occupation and the period of non-qualifying occupation or use. The portion that falls within the qualifying period is relieved. The remainder is chargeable.

The Final Nine Months Exemption

HMRC allows a final period exemption as part of Private Residence Relief. The last nine months of ownership always count as a qualifying period of residence, regardless of whether you were actually living in the property during that time. This is specifically designed to help sellers who have already moved into a new home before their previous property has sold.

What the Final Period Exemption Means in Practice

If you moved out of your property nine months or less before completion of the sale, the full gain may still be covered by Private Residence Relief, provided you had been living in the property as your main home before you moved out. If the property is on the market for longer than nine months after you vacate, the final nine months are still exempt but the period beyond nine months during which the property was empty and not your main residence may generate a partially chargeable gain.

Extended Final Period for Specific Circumstances

For owners who are in long-term residential care or who have a qualifying disability, the final period exemption extends to thirty-six months rather than nine months.

How to Calculate Your Capital Gains Tax Liability

If you have established that some or all of your gain is chargeable and not covered by Private Residence Relief, the following steps explain how to calculate what you owe.

Step One: Calculate the Gross Gain

The gross gain is the difference between what you received when you sold the property and what you paid for it when you acquired it. Use the actual sale proceeds and the actual purchase price.

Using Market Value Instead of Sale Price

In some situations, market value is used instead of the actual transaction price. This applies where you gift the property, sell it at below market value to a connected person, or where the property was acquired other than by purchase, such as through inheritance.

Step Two: Deduct Allowable Costs

Certain costs can be deducted from the gross gain to reduce the chargeable amount. The allowable costs for residential property include:

Acquisition Costs

• The original purchase price of the property

• Stamp Duty Land Tax paid on the original purchase

• Legal fees paid on the original purchase

• Survey and valuation fees paid on the original purchase

Improvement Costs

Capital expenditure on improvements to the property that are still reflected in its value at the point of sale. This covers extensions, loft conversions, kitchen and bathroom renovations, and other structural improvements. It does not include normal maintenance and repair work, which is not allowable.

Disposal Costs

• Legal fees paid on the sale

• Estate agent fees or private listing platform fees paid on the sale

• Costs of preparing the property for sale that qualify as disposal costs

The total of these allowable deductions is subtracted from the gross gain to arrive at the net gain.

Step Three: Apply Private Residence Relief

If Private Residence Relief applies in full, the entire net gain is relieved and no further calculation is needed.

If Private Residence Relief applies only in part, calculate the proportion of the net gain that is relieved. This is typically done by dividing the number of months of qualifying occupation by the total number of months of ownership, then applying that proportion to the net gain.

Step Four: Deduct the Annual Exempt Amount

After applying Private Residence Relief to arrive at the chargeable gain, deduct your Annual Exempt Amount for the year. For 2025/26, this is three thousand pounds per individual. The result is your taxable gain.

Step Five: Apply the Correct Rate

Apply the appropriate rate to the taxable gain. Stack the taxable gain on top of your taxable income for the year to determine how much falls within the unused basic rate band and how much falls above it. Apply 18 percent to the portion within the basic rate band and 24 percent to any portion above it.

A Worked Example

Consider a seller who purchased a buy-to-let flat for one hundred and fifty thousand pounds in 2014 and sells it for two hundred and sixty thousand pounds in 2026. They never lived in the flat, so no Private Residence Relief is available.

Gross gain: one hundred and ten thousand pounds

Allowable deductions: purchase legal fees three thousand pounds, original stamp duty five thousand pounds, extension carried out in 2018 at a cost of twelve thousand pounds, sale legal fees one thousand two hundred pounds, estate agent or listing fee one thousand five hundred pounds. Total allowable deductions: twenty-two thousand seven hundred pounds.

Net gain: eighty-seven thousand three hundred pounds.

Annual Exempt Amount deducted: three thousand pounds.

Taxable gain: eighty-four thousand three hundred pounds.

The seller has taxable income of thirty-five thousand pounds for the year, leaving fifteen thousand two hundred and seventy pounds of unused basic rate band. The first fifteen thousand two hundred and seventy pounds of the taxable gain is taxed at 18 percent, equalling two thousand seven hundred and forty-eight pounds sixty. The remaining sixty-nine thousand and thirty pounds is taxed at 24 percent, equalling sixteen thousand five hundred and sixty-seven pounds twenty. Total Capital Gains Tax: nineteen thousand three hundred and fifteen pounds eighty.

This is a simplified illustration. Tax calculations for specific situations should always be confirmed with a qualified tax adviser or accountant before you rely on them.

Situations Where Capital Gains Tax Most Commonly Applies to Residential Sellers

Buy-to-Let Properties

If you are selling a buy-to-let property that you have never lived in, no Private Residence Relief is available and the full gain is potentially chargeable. This is the most straightforward scenario for a Capital Gains Tax liability on a residential property sale.

Second Homes and Holiday Properties

If you are selling a second home or holiday property that has not been your main residence, Capital Gains Tax applies to the full gain in the same way as a buy-to-let property. You cannot claim Private Residence Relief on a property that was not nominated as your main residence for the relevant period.

Former Main Residence That Has Been Rented Out

If you previously lived in the property as your main home but later rented it out before selling, Private Residence Relief covers the period of your occupation and the final nine months of ownership. The period during which the property was rented out after you vacated, beyond the nine-month final period, is chargeable unless another relief applies.

Inherited Property

Inheriting a property does not itself trigger Capital Gains Tax. The tax arises when you later sell the inherited property. The base cost for Capital Gains Tax purposes is the probate value, which is the market value of the property at the date of death rather than the original purchase price paid by the deceased. If you live in the inherited property as your main home, Private Residence Relief applies to your period of occupation in the usual way.

Separation and Divorce

Transfers of property between spouses and civil partners are generally exempt from Capital Gains Tax during the tax year of separation and for up to three years following the end of the tax year in which they separate. Transfers made as part of a formal divorce agreement have no time limit on this exemption. Where property is transferred outside these windows, Capital Gains Tax may apply. This is an area where professional advice is strongly recommended given the interaction of family law and tax law.

Properties with Business Use

If part of your main home has been used exclusively and regularly for business purposes, Private Residence Relief may be restricted. The portion of the gain relating to the business-use element may be chargeable. This applies where a room is used solely and permanently as a business office rather than as a room that also functions as a bedroom or study for personal use.

Large Gardens and Grounds

Private Residence Relief normally covers up to half a hectare of grounds. For larger properties with grounds exceeding half a hectare, the excess may be chargeable unless the larger area is reasonably required given the size of the house. Whether a larger area qualifies is a question of fact and is sometimes disputed.

Lettings Relief

Lettings Relief was formerly a significant relief available to sellers who had rented out part or all of their main home. Since April 2020, the scope of Lettings Relief has been very substantially restricted.

The Current Position on Lettings Relief

As of 2026, Lettings Relief is only available in cases where the owner was sharing occupation of the property with the tenant at the time of letting. This means the relief no longer applies in the situation that was most commonly encountered before April 2020, which was where the owner had moved out and was renting the entire property.

Where Lettings Relief does apply, it is capped at the lower of:

• Forty thousand pounds per owner

• The amount of Private Residence Relief the owner is entitled to on the property

• The amount of the gain attributable to the letting period

For a jointly owned property where both owners qualify, the maximum combined Lettings Relief is eighty thousand pounds. Given the restriction to shared occupation scenarios, this relief is now relevant only in a limited number of situations.

Nominating Your Main Residence

If you own more than one residential property, you can nominate which one should be treated as your main residence for Private Residence Relief purposes. This nomination must be made to HMRC within two years of a change in your combination of residences becoming available.

Why Nomination Matters

If you own two properties and sell the one that was not nominated as your main residence, Capital Gains Tax will apply to the gain on that property because Private Residence Relief attaches to the nominated main residence. By making a strategic nomination, owners with two properties can in some circumstances ensure that the property with the larger gain benefits from Private Residence Relief.

The Two-Year Deadline

The nomination must be made within twenty-four months of the change in circumstances that creates the choice between residences. If you acquire a second property and do not nominate within two years, HMRC will determine which property was your main residence based on the facts, which may not produce the most tax-efficient outcome.

Changing a Nomination

You can change your nomination at any time. The change takes effect from the date the new nomination is submitted to HMRC. Changing a nomination does not have retroactive effect.

Reporting and Paying Capital Gains Tax on a Property Sale

If your property sale produces a chargeable gain after reliefs and the Annual Exempt Amount, you are required to report it to HMRC and pay any tax owed within a specific deadline.

The 60-Day Reporting Deadline for UK Residents

UK resident sellers who dispose of a UK residential property at a gain that is not fully covered by Private Residence Relief must report the disposal and pay any Capital Gains Tax owed to HMRC within sixty days of the completion date of the sale. This applies to completions from 27 October 2021 onwards.

How to Report

Reporting is done through HMRC's online Capital Gains Tax on UK property service, which is accessed through the Government Gateway. This is a separate submission from the annual Self Assessment tax return.

What Happens if You Also File Self Assessment

If you are required to file an annual Self Assessment tax return, you must also include the property disposal in that return for the year in which the sale completed. The sixty-day return is not a substitute for Self Assessment. However, you pay the tax through the sixty-day return within sixty days of completion. You do not pay it again through Self Assessment, though you may need to reconcile the figures.

Penalties for Late Reporting

HMRC imposes financial penalties for failing to submit the sixty-day return on time and charges interest on any tax paid late. The penalty regime starts immediately after the sixty-day deadline passes. There are no exceptions for sellers who were unaware of the requirement.

Non-UK Resident Sellers

Non-UK resident sellers are subject to a different reporting regime. They are required to report any disposal of UK residential property to HMRC within sixty days of completion regardless of whether the gain is fully covered by Private Residence Relief or whether any tax is owed. The obligation to report applies even where no tax is payable.

Reducing Your Capital Gains Tax Liability

Understanding the legitimate ways to reduce a Capital Gains Tax liability before you sell is far more effective than attempting to address it after the fact.

Claim All Allowable Costs

Ensuring you have claimed all allowable acquisition costs, improvement costs, and disposal costs reduces the gross gain and therefore the amount of tax owed. Keep records of all relevant expenditure throughout your period of ownership.

Make Use of the Annual Exempt Amount

Each individual has a three thousand pound Annual Exempt Amount. For jointly owned properties, both owners have a separate allowance. Selling in a tax year where you have not already used the Annual Exempt Amount on other gains ensures the full allowance is available to reduce your liability.

Utilise Capital Losses

If you have made capital losses on other disposals in the same tax year, or have unused losses carried forward from previous years, these can be offset against the property gain before applying the Annual Exempt Amount. Capital losses must be reported to HMRC to be usable.

Transfer to a Spouse or Civil Partner Before Sale

Transfers of assets between spouses and civil partners who are living together are exempt from Capital Gains Tax. If the property is in one partner's name and the other has unused Annual Exempt Amount or a lower income in the year of sale, transferring a share before the sale can reduce the overall tax liability. This should only be done as a genuine transfer and with the benefit of professional advice.

Timing the Disposal Across Tax Years

Because the Annual Exempt Amount is a use-it-or-lose-it allowance for each tax year, a seller who has control over when the sale completes can consider whether completing in one tax year rather than another makes better use of the allowances available.

Take Professional Advice

Capital Gains Tax on property can be complex, particularly in situations involving partial Private Residence Relief, lettings, business use, or multiple properties. Taking advice from a qualified tax adviser or accountant before completing the sale is strongly recommended in any case where the position is not entirely straightforward.

Capital Gains Tax on Overseas Property

If you are a UK resident and sell a residential property located overseas, Capital Gains Tax applies to any gain you make in the same way as it would for a UK property. The same rates, reliefs, and Annual Exempt Amount apply.

You may also have a tax liability in the country where the property is located. Where both the UK and another country tax the same gain, the UK has double tax agreements with many countries that can prevent you from being taxed twice on the same gain. The specifics depend on which country is involved and should be confirmed with a tax adviser experienced in cross-border property transactions.

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