If you are selling a property that is not your main home — a buy-to-let, a second home, an inherited house, or even a property you once lived in but no longer do — Capital Gains Tax (CGT) will likely be on your bill. And in 2026, the rules are less generous than they were just a couple of years ago, thanks to a series of allowance reductions and rate changes that have significantly increased the tax burden on property disposals.
This guide explains exactly how CGT on property works in 2026/27, how to calculate what you owe, and the legitimate ways to reduce your bill.
CGT Rates on Property in 2026/27
Capital Gains Tax on residential property is charged at higher rates than gains on other assets. Following the changes announced in the Autumn Budget 2024, the rates for residential property gains in 2026/27 are:
- Basic-rate taxpayers: 18% on gains that fall within the basic rate band
- Higher and additional-rate taxpayers: 24% on gains that exceed the basic rate band
These rates apply to the gain after deducting your annual CGT allowance and any allowable costs. The 24% rate is the same as it was set in October 2024 — a jump from the previous 28% rate that actually represented a reduction, though the overall burden increased due to the slashed annual allowance.
To calculate your CGT liability for a property sale, use our capital gains tax calculator, which accounts for the current rates, allowances, and your income tax position.
The Annual Exempt Amount: Much Lower Than Before
The annual CGT allowance (formally the Annual Exempt Amount) has been dramatically reduced over the past few years:
- 2022/23: £12,300
- 2023/24: £6,000
- 2024/25 onwards: £3,000
That £3,000 allowance is still in place for 2026/27. It means the first £3,000 of your total capital gains in the tax year are tax-free, but anything above that is taxable. For property disposals, where gains of £50,000 or more are common, this allowance barely makes a dent.
How to Calculate Your Gain
Your taxable gain is not simply the difference between what you paid and what you sold for. You can deduct several legitimate costs:
- Purchase costs: The original purchase price, plus stamp duty, legal fees, and survey costs from when you bought the property
- Improvement costs: Money spent on permanent improvements (extensions, new kitchens, structural work) — but not maintenance or repairs
- Selling costs: Estate agent fees, legal fees, and EPC certificate costs
For example, if you bought a buy-to-let for £200,000 (plus £8,500 in purchase costs), spent £25,000 on an extension, and sold for £350,000 (with £7,500 in selling costs), your gain would be: £350,000 − £200,000 − £8,500 − £25,000 − £7,500 = £109,000. After the £3,000 allowance, you would pay CGT on £106,000.
If you are a higher-rate taxpayer, that is £106,000 × 24% = £25,440 in CGT. It is a substantial sum, and it is why planning around property disposals is so important.
Private Residence Relief and Lettings Relief
If the property was once your main home, you may qualify for Private Residence Relief (PRR) on the portion of ownership during which it was your primary residence. PRR also covers the last nine months of ownership, regardless of whether you lived there during that period (this was reduced from 18 months in April 2020).
Lettings relief, which used to provide additional relief when a former home was rented out, has been severely curtailed. Since April 2020, it only applies if you were in shared occupancy with the tenant — a situation so rare it is effectively irrelevant for most people.
For inherited properties, you do not pay CGT on the gain that accrued before you inherited it. Your base cost is the property's market value at the date of death, as determined for probate purposes. You only pay CGT on any increase in value after that date. Our inheritance tax calculator can help you understand the IHT implications, while the capital gains tax calculator covers the CGT on any subsequent sale.
Reporting and Payment: The 60-Day Rule
One of the most important rules to be aware of is the 60-day reporting requirement. When you sell a UK residential property that gives rise to a CGT liability, you must report the disposal to HMRC and pay the estimated tax within 60 days of completion. This is done through HMRC's online CGT property disposal service.
Missing this deadline results in automatic penalties: £100 if you are up to six months late, with additional penalties for longer delays. Interest is also charged on late payment from the 60-day deadline. You will still need to include the disposal on your Self-Assessment tax return for the year, where any overpayment or underpayment will be reconciled.
Strategies to Reduce Your CGT Bill
There are several legitimate ways to reduce CGT on property:
- Use both annual allowances: If you co-own the property with a spouse or civil partner, you each have a £3,000 allowance, giving £6,000 combined
- Transfer between spouses: Transfers between spouses are CGT-free, so you can equalise ownership before sale to ensure both allowances and both basic-rate bands are used
- Maximise deductible costs: Keep receipts for all improvements and professional fees. These reduce your taxable gain pound for pound
- Consider timing: If you are close to the end of a tax year, delaying completion until after 6 April gives you a fresh annual allowance
- Pension contributions: Making pension contributions can reduce your taxable income, potentially keeping you in the basic rate band and qualifying for the lower 18% CGT rate on property
Our landlord tax calculator is designed specifically for property investors and factors in rental income, mortgage interest relief, and CGT projections to give you a complete picture of your property tax position.