Capital gains on real estate: UK guide for sellers

Capital gains on real estate is the tax charged on the profit you make when you dispose of property that is not your only or main home. HMRC confirms that this applies whether you sell, gift, transfer, or otherwise dispose of a qualifying property. If you own a buy-to-let flat, a holiday cottage, inherited land, or any second property, you are almost certainly within scope.

The most urgent fact: for UK residential property disposals, you must report and pay within 60 days of completion. Miss that window and automatic penalties follow.

Quick verdict — does this apply to you?

Main home only: Private Residence Relief will likely eliminate or substantially reduce your gain. You may still need to report if the gain exceeds the Annual Exempt Amount (AEA).
Buy-to-let or second home: CGT almost certainly applies. Gather your purchase documents and start your calculation now.
Inherited property: CGT applies on any gain above the probate valuation. The base cost is the value at the date of death, not the original purchase price.
Non-resident owner: You must report every UK residential disposal within 60 days, even if no tax is due.

Pro Tip: Before anything else, locate your original purchase completion statement, all invoices for capital improvements, and your sale completion statement. These three documents form the backbone of every CGT calculation.

Key takeaways

Point	Details
CGT applies to non-main-home disposals	Buy-to-let, second homes, inherited property, and gifts are all within scope.
60-day deadline is strict	Report and pay via HMRC’s online service within 60 days of completion or face automatic penalties.
Rates are 18% or 24%	The rate depends on whether the gain falls within your remaining basic-rate band; confirm the current AEA on GOV.UK.
Allowable costs reduce the gain	SDLT, legal fees, and capital improvements all reduce your chargeable gain — keep every invoice.
Spouse transfers and timing can help	Transferring a share before sale uses two Annual Exempt Amounts and may reduce the overall bill.

Which UK property disposals are chargeable for CGT?
How to calculate your capital gain: step-by-step with a worked example
What costs can you actually deduct?
CGT rates for property and how the Annual Exempt Amount works
Reliefs and exemptions that can reduce or eliminate your CGT
How and when to report and pay CGT on UK property
Special situations: inherited property, gifts, joint ownership and non-residents
Practical ways to reduce or defer your CGT liability
Why the 60-day report is more complex than it looks
What advisers see go wrong — and when to get specialist help
Sources
FAQ

Which UK property disposals are chargeable for CGT?

HMRC’s guidance draws a clear line: CGT applies to disposals of property that is not your only or main home. Understanding which side of that line you stand on is the first practical step.

Chargeable disposals include:

Buy-to-let residential properties
Holiday homes and second residences
Business premises and commercial property
Land (including garden or grounds sold separately from the main house)
Inherited property sold above its probate value
Gifts of property to anyone other than a spouse or civil partner
Transfers into or out of a trust

Common exceptions and non-chargeable situations:

Your only or main home, where Private Residence Relief typically eliminates the gain
Transfers between spouses or civil partners (treated as no gain/no loss)
Disposals where the total proceeds fall below the AEA and no other gains exist in the same tax year
Certain business asset disposals that qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which applies a reduced rate rather than exempting the gain entirely

Borderline cases worth knowing:

A garden or grounds sold separately from the main house can lose Private Residence Relief if the plot exceeds half a hectare or is sold after the house itself. Selling part of a property, such as a converted annexe or a portion of land, creates a partial disposal and requires an apportionment of the original base cost. For a fuller picture of what qualifies as an investment property versus a main home, the distinction matters enormously to your tax position.

How to calculate your capital gain: step-by-step with a worked example

The calculation method follows a consistent formula. Work through it in order and you will arrive at your taxable gain before applying rates.

The formula

Net disposal proceeds minus allowable base cost minus reliefs = chargeable gain
Chargeable gain minus Annual Exempt Amount = taxable gain

Step-by-step calculation

Start with your gross sale proceeds (the price agreed with the buyer).
Deduct disposal costs: estate agent fees, solicitor fees, and marketing costs.
This gives you net disposal proceeds.
Deduct your original purchase price.
Deduct acquisition costs: Stamp Duty Land Tax paid on purchase, solicitor fees, survey costs, and any purchase agent fees.
Deduct capital improvements: extensions, loft conversions, new kitchens that represent an enhancement (not a like-for-like repair).
This gives your chargeable gain.
Deduct any applicable reliefs (Private Residence Relief, for example).
Deduct the Annual Exempt Amount (check the current figure on GOV.UK before filing, as it has changed following the Autumn Budget 2024).
The result is your taxable gain.

Worked example

Suppose you sell a buy-to-let flat for £380,000.

(The AEA figure used above reflects the £3,000 level applicable from 2024/25. Always confirm the current figure on GOV.UK before filing.)

Now allocate the taxable gain across the CGT rate bands.

Documents you need to support each line:

Completion statement from original purchase (purchase price and SDLT)
Solicitor invoices for purchase and sale
Contractor invoices and planning permission documents for every capital improvement
Estate agent fee agreement and completion statement from sale
Any valuation report if the property was inherited or gifted

What costs can you actually deduct?

Getting the allowable deductions right is where many sellers leave money on the table, or conversely, claim costs that HMRC will disallow.

Allowable acquisition costs:

Stamp Duty Land Tax (or Land and Buildings Transaction Tax in Scotland, Land Transaction Tax in Wales)
Solicitor and conveyancer fees on purchase
Survey and valuation fees paid on acquisition
Purchase agent or buying agent fees

Allowable disposal costs:

Estate agent or auctioneer fees
Solicitor fees on sale
Costs of advertising the property for sale

Capital improvements (allowable):

Extensions and conversions that add space or change the use of the property
New structural elements: roof replacement where it represents an improvement, not a repair
Fitted kitchens or bathrooms that represent an enhancement above the original specification

Revenue repairs (not allowable against CGT):

Repainting and decorating
Replacing like-for-like fixtures (a broken boiler replaced with an equivalent model)
General maintenance and gardening

The distinction between a capital improvement and a revenue repair is one of the most contested areas in property CGT. A new kitchen installed when the property was purchased with no kitchen is a capital improvement. The same kitchen replaced twenty years later with a comparable model is a repair. The test is whether the work enhanced the property beyond its original state — not simply whether it was expensive.

Pro Tip: For properties held for more than ten years, obtain a retrospective schedule of works from your solicitor or accountant, cross-referenced against bank statements and invoices. HMRC can and does request evidence for improvement claims, particularly on high-value disposals.

CGT rates for property and how the Annual Exempt Amount works

The rate you pay depends on whether the gain falls within your remaining basic-rate income tax band or above it. Following the Autumn Budget 2024, the headline rates for residential property disposals by individuals are 18% for gains within the basic-rate band and 24% for gains above it. GOV.UK confirms the current rates and AEA — always check before filing, as figures can change with each Budget.

How the band allocation works:

Add your taxable gain to your total taxable income for the year.
Any portion of the combined total that falls within the basic-rate band (up to £50,270 for 2024/25, though confirm the current threshold) is taxed at 18%.
Any portion above the basic-rate threshold is taxed at 24%.
The Annual Exempt Amount (£3,000 from 2024/25) is deducted from the chargeable gain before this allocation.

Rate differences by taxpayer type:

Individuals: 18% / 24% as above for residential property
Trustees and personal representatives: typically the higher rate applies; check GOV.UK for the current trustee rate
Companies: companies pay Corporation Tax on gains rather than CGT; different rules apply entirely

Statistic callout: The Annual Exempt Amount fell from £12,300 in 2022/23 to £6,000 in 2023/24 and then to £3,000 from 2024/25 onwards. For a higher-rate taxpayer, that reduction alone means significantly more CGT payable on the same gain compared to two years ago. Confirm the figure applicable to your disposal year on GOV.UK.

Two-slice example:

A seller with £30,000 of taxable income disposes of a buy-to-let with a taxable gain of £40,000. The remaining basic-rate capacity is £20,270 (£50,270 minus £30,000).

Reliefs and exemptions that can reduce or eliminate your CGT

Several reliefs can dramatically reduce a CGT liability, and some eliminate it entirely. The key is knowing the eligibility conditions before you dispose, not after.

Private Residence Relief (PRR)

PRR is the most valuable exemption in residential property CGT. It covers the proportion of the ownership period during which the property was your main residence, plus the final 9 months of ownership regardless of whether you were living there. The HMRC helpsheet HS283 sets out the full calculation.

Calculate total months of ownership.
Calculate months of qualifying occupation (plus the final 9 months).
The fraction of qualifying months over total months is applied to the gain — that fraction is exempt.
The remaining fraction is chargeable.

Lettings relief

Since 6 April 2020, lettings relief is only available where the owner was in shared occupancy with the tenant — meaning they lived in the property at the same time as the tenant. The previous, more generous version that applied to any let period of a former main home no longer applies. For most landlords who moved out before letting, lettings relief is no longer available.

Hold-over relief

Available on gifts of business assets and certain other transfers, hold-over relief defers the gain by reducing the recipient’s base cost. It does not eliminate the tax; it postpones it until the recipient disposes of the asset.

Spouse and civil partner transfers

Transfers between spouses or civil partners living together are treated as no gain/no loss. The receiving spouse takes the transferor’s original base cost. This is a planning tool, not an exemption — the gain is preserved and will crystallise on a future disposal.

Business Asset Disposal Relief

Property used in a trading business may qualify, but purely investment property does not. The conditions are specific; specialist advice is warranted.

How and when to report and pay CGT on UK property

The reporting process for UK residential property disposals is separate from Self Assessment and carries a strict 60-day deadline. HMRC’s online service is the only channel for this filing.

Filing checklist

Gather documents: completion statements, purchase invoices, improvement receipts, and any valuation reports.
Calculate your provisional liability: work through the formula above, applying the correct rates and AEA.
Create or log in to your HMRC online account (Government Gateway credentials required).
Access the ‘CGT on UK property’ service and complete the return, entering income, prior gains, and the disposal details.
Submit the return and pay the provisional tax within 60 days of the completion date.
Reconcile on Self Assessment: if you are within Self Assessment, include the disposal on your annual return and adjust for any over- or underpayment.

Penalties and interest for late filing:

A £100 fixed penalty applies automatically if the return is filed after the 60-day deadline.
Daily penalties of £10 per day can apply after 3 months (up to 90 days).
A further penalty of 5% of the tax due (or £300 if greater) applies at 6 months and again at 12 months.
Interest accrues on unpaid tax from the day after the 60-day deadline.

Non-residential property (commercial premises, land) is reported through Self Assessment rather than the 60-day service. The deadline is the standard Self Assessment filing date.

Key facts at a glance:

Special situations: inherited property, gifts, joint ownership and non-residents

Inherited property

When you inherit a property, your base cost for CGT purposes is the market value at the date of death — not the price the deceased originally paid. Any gain above that probate value is chargeable when you sell. If the property was also your main home for a period after inheritance, PRR may apply to that portion of the ownership.

Gifts and market-value disposals

Gifting a property to anyone other than a spouse or civil partner is treated as a disposal at market value, regardless of the actual consideration received. If you gift a property worth £500,000 to a child, CGT is calculated as though you sold it for £500,000. Hold-over relief may be available for business assets but not for investment property.

Jointly owned property

Each co-owner has their own gain, calculated on their share of the proceeds and costs. Crucially, each owner has their own Annual Exempt Amount. A married couple selling a jointly owned buy-to-let can each use their AEA, potentially sheltering £6,000 of gain in total (at current rates — confirm on GOV.UK). For portfolio management across multiple properties, splitting ownership strategically before disposal is a well-established planning approach.

Non-resident owners

Non-residents must report every disposal of UK property within 60 days of completion, even where no tax is due. For residential property acquired before 6 April 2015, HMRC guidance permits rebasing to the market value at 5 April 2015, meaning only the gain accrued from that date is chargeable. Obtaining a professional valuation for that specific date is not optional — it is the evidence base HMRC will expect if the return is queried.

Practical ways to reduce or defer your CGT liability

Reducing a CGT bill is entirely lawful when done through proper planning. The most effective strategies work best when considered before the disposal, not after completion.

Timing and tax-year planning:

Completing a disposal in a new tax year gives access to a fresh Annual Exempt Amount and, for basic-rate taxpayers, a fresh slice of unused basic-rate band.
Where a disposal can be split across two tax years (for example, exchanging contracts in one year and completing in the next), the gain is recognised at completion — though this requires careful legal structuring.

Spouse transfers before disposal:

Transferring a share of the property to a spouse or civil partner before sale uses two Annual Exempt Amounts and splits the gain across two taxpayers, potentially keeping more of it within the basic-rate band.
The transfer itself is at no gain/no loss, so no immediate CGT arises on the transfer.

Documenting improvements properly:

Every capital improvement correctly claimed reduces the chargeable gain pound for pound. A £30,000 extension that is not claimed because the invoices were lost is £30,000 of unnecessary taxable gain.
For long-term property value strategies, maintaining a running schedule of works from the date of purchase is the single most effective record-keeping habit.

Deferral reliefs:

Hold-over relief defers gains on qualifying business asset gifts.
Rollover relief allows gains on business assets to be deferred when the proceeds are reinvested in qualifying replacement assets within a set window.

Common pitfalls:

Claiming revenue repairs as capital improvements — HMRC challenges these routinely.
Missing the 60-day deadline and triggering automatic penalties.
Non-residents failing to obtain a 5 April 2015 valuation and defaulting to a straight-line apportionment, which often produces a higher gain.
Assuming PRR covers the entire gain without checking whether there were periods of letting or absence that reduce the relief.

Pro Tip: If you are planning a disposal in the next 12 months, consult a chartered tax adviser before exchange of contracts — not after. The most valuable planning opportunities close at the point of exchange.

Why the 60-day report is more complex than it looks

The 60-day return is not simply a payment on account. HMRC’s internal manual explains that the CGT on UK Property service calculates a “notionally chargeable” amount at the filing date. This calculation assumes the disposal is the only transaction in the tax year — it does not automatically account for other income, prior gains, or losses you may have realised earlier in the same year.

This matters because the provisional tax you pay may be too high or too low. If you have already used part of your basic-rate band through employment income, or realised other gains earlier in the year, the notionally chargeable figure will not reflect that. The correct position is only established when you complete your Self Assessment return for the full tax year.

Statistic callout: HMRC’s notionally chargeable calculation treats the property disposal as if it were the taxpayer’s sole transaction for the year. Where a taxpayer has significant other income or prior gains, the provisional payment can diverge materially from the final liability — making the Self Assessment reconciliation a critical step, not a formality.

The practical implication: keep a clear record of the provisional payment made through the 60-day service. When you file your Self Assessment return, you will either receive a repayment or face an additional charge. Failing to reconcile correctly — or omitting the disposal from Self Assessment entirely — is a common source of HMRC enquiries.

Pro Tip: When completing the 60-day return, enter your best estimate of total income and prior gains for the year. An accurate estimate reduces the risk of a large reconciliation adjustment later. Your accountant can run a provisional income projection before you file.

What advisers see go wrong — and when to get specialist help

The two errors we see most consistently are missed 60-day deadlines and inadequate records for capital improvements. Both are entirely avoidable, yet both generate disproportionate HMRC attention. A landlord who sells a property held for fifteen years and cannot produce a single improvement invoice is, in effect, paying tax on money they already spent.

For straightforward disposals — a single buy-to-let sold with clean records and no PRR complexity — the GOV.UK guidance and the online service are genuinely sufficient for a confident, numerate seller. The HMRC tools and calculators available at GOV.UK provide a useful starting point for estimating liability.

Seek specialist advice when any of the following apply: the property was inherited or gifted; you are a non-resident or have dual residency; the disposal involves a trust; there are multiple owners with different acquisition dates; or the gain is large enough that a planning error would cost more than a professional fee. For high-value disposals, particularly those involving luxury real estate or complex ownership structures, the cost of specialist advice is almost always recovered through better-structured claims and reliefs.

At Living On The Cote d’Azur, we work alongside tax specialists and legal advisers to ensure that clients considering a disposal — or a reinvestment into prestige property — understand the full picture before they commit. Whether you are selling a Côte d’Azur villa or a London investment flat, the tax implications of real estate sales deserve the same careful attention as the transaction itself.

Sources

The following GOV.UK pages and services underpin every section of this article. Check the “last updated” date on each page before filing, as rates and thresholds change with each Budget.

This article provides general information only and is not a substitute for professional tax advice. Confirm current rates, thresholds, and deadlines on GOV.UK or with a qualified tax adviser before filing.

FAQ

How is the capital gain calculated on a property sale?

The gain is your net sale proceeds minus your original purchase price, acquisition costs (including Stamp Duty Land Tax and legal fees), and any capital improvements. Deduct the Annual Exempt Amount from the resulting chargeable gain to arrive at the taxable gain.

How can you reduce capital gains tax on a residential property?

Lawful strategies include transferring a share to a spouse before sale to use two Annual Exempt Amounts, timing the disposal to use unused basic-rate band, and claiming all allowable capital improvements. Private Residence Relief eliminates or reduces the gain if the property was your main home for part of the ownership period.

How much CGT do you pay when selling a property?

Always confirm the current figures on GOV.UK before filing.

What is the best way to avoid CGT on real estate legally?

Private Residence Relief is the most powerful exemption and applies automatically to your main home. Beyond that, spouse transfers, careful timing of disposals across tax years, and thorough documentation of capital improvements are the most effective lawful approaches. Complex situations — non-residents, inherited property, trusts — warrant specialist tax advice before exchange of contracts.