If you’re selling a property that isn’t your main home – a buy-to-let, a holiday cottage, an inherited flat – Capital Gains Tax will almost certainly be part of the picture. And with the annual exempt amount now at just £3,000, most sellers will owe something.
The good news is that the rules allow for plenty of legitimate ways to reduce the bill. Private Residence Relief, spousal transfers, capital losses, and careful timing can all make a real difference. But you need to understand how they work – and which ones have changed – before you complete the sale.
Let’s walk through how CGT applies to second home sales, what the current rates and reliefs look like, and how to keep the bill as low as possible.
How CGT Works on Property Sales
Capital Gains Tax is charged on the profit you make when you sell an asset, not the total sale price. That profit – your “gain” – is broadly the difference between what you paid for the property and what you sold it for, after deducting allowable costs.
For residential property disposals by individuals in 2026/27, the rates are:
- 18% on gains falling within your unused basic-rate income tax band
- 24% on gains above that
These rates have been in place since October 2024, when the higher rate for residential property came down from 28% to 24%. They apply to all residential property that isn’t covered by Private Residence Relief – so second homes, buy-to-lets, holiday homes, and inherited properties when they’re later sold.
It’s worth noting that inheriting a property doesn’t trigger CGT in itself. The tax arises when you dispose of it, and your starting cost for the calculation is generally the property’s probate value at the date of death, not the original purchase price.
The Annual Exempt Amount
Each individual gets a £3,000 annual exempt amount – gains below this threshold aren’t taxed. If you’re selling jointly with a spouse or civil partner, that doubles to £6,000.
This was £12,300 as recently as 2022/23, so the reduction has been dramatic. A gain that would once have been fully sheltered now generates a tax bill.
The 60-Day Reporting Rule
On most UK residential property sales where CGT is due, you must report the disposal and pay the tax within 60 days of the completion date. This is done through HMRC’s online Capital Gains Tax on UK property service, separate from your annual Self Assessment return.
Missing the deadline triggers an automatic £100 penalty, with further penalties and daily interest accruing after that. This catches a lot of sellers out – particularly those who assume they can wait until 31 January to settle up through Self Assessment.
You’ll also need to include the gain on your Self Assessment return for the year, but any tax paid under the 60-day rule counts as a payment on account.
What Counts as Your Main Home
Your main residence is normally exempt from CGT under Private Residence Relief (PRR). The question is whether the property you’re selling qualifies – and for how much of your ownership period.
If you lived in the property as your only home for the entire time you owned it, PRR covers the full gain and there’s no tax to pay.
If you lived there for part of the time and then moved out, PRR is time-apportioned. You get relief for the periods the property was your main home, plus the final nine months of ownership regardless of whether you were living there. For disabled individuals or those moving into long-term residential care, that final period extends to 36 months.
The Main Residence Nomination
If you own more than one property, you can nominate which one should be treated as your main residence for PRR purposes. The nomination must be made within two years of the date your combination of residences changes.
This is a genuine planning opportunity. Choosing carefully – and reviewing the nomination when circumstances change – can make a material difference to the CGT position on whichever property you sell first. Married couples and civil partners can only have one main residence between them.
Letting Relief – Now Much More Limited
Letting Relief used to be one of the most generous CGT reliefs for landlords. Before April 2020, it could shelter up to £40,000 of gain on a former home that had been rented out after the owner moved away.
That’s no longer how it works. Since 6 April 2020, Letting Relief only applies if you lived in the property at the same time as the tenant – for example, if you had a lodger while it was still your main home. If you moved out and then let the whole property to a tenant, Letting Relief doesn’t apply to that period.
The relief can still be worth up to £40,000 per owner where the shared-occupancy condition is met, but the vast majority of former main residences that were later fully let will not qualify. This is one of the most commonly misunderstood points in property CGT, and older guidance online often still describes the pre-2020 rules.
Periods of Absence
There are limited situations where time away from the property can still count as occupation for PRR purposes. HMRC allows deemed occupation for certain qualifying absences – for example, up to four years working elsewhere in the UK, or unlimited time working abroad, provided conditions are met.
There are also provisions that may apply when you buy a new home before selling the old one – but these are more nuanced than a simple automatic overlap rule. The conditions depend on the specific circumstances, such as whether you couldn’t sell the old home or the new home was being built. Professional advice is worth taking if you’re in this position.
Strategies to Reduce Your CGT Bill
There’s no way to avoid CGT entirely on a profitable second home sale, but several strategies can bring the bill down legitimately.
Use Both Annual Exempt Amounts
If the property is jointly owned with a spouse or civil partner, both of you get the £3,000 exemption – sheltering £6,000 of gain between you. If the property is currently in one name only, transferring a share before sale can double up.
Transfers between spouses or civil partners who are living together happen on a no gain/no loss basis, so the transfer itself doesn’t trigger a tax charge. This also means the lower-earning partner’s basic-rate band can be used, potentially taxing part of the gain at 18% rather than 24%.
Deduct All Allowable Costs
You can offset certain expenses against the gain. These include:
- Stamp duty paid when you bought the property (now at 5% surcharge rates for additional properties purchased from October 2024)
- Solicitor and estate agent fees on both purchase and sale
- The cost of improvements that enhanced the property’s value – extensions, conversions, new kitchens or bathrooms
Routine maintenance and repairs don’t count. The distinction matters: replacing a broken boiler is a repair, but installing central heating for the first time is an improvement.
Use Capital Losses
If you’ve made losses on other asset disposals – shares, for example – these can be offset against your property gain in the same tax year. Unused losses from previous years can also be brought forward, though you must have reported them to HMRC at the time (within four years of the end of the tax year they arose).
You also have some flexibility in how much brought-forward loss to apply. If applying the full loss would waste your £3,000 annual exemption, you can choose to use only part of it.
Time the Sale Across Tax Years
If you’re not in a rush, completing the sale just after 6 April means you use the new tax year’s annual exempt amount rather than the current one. This is a simple but effective way to shelter an extra £3,000 of gain – or £6,000 for a jointly owned property.
Check for Partial Private Residence Relief
If you ever lived in the property as your main home – even briefly – you may be entitled to partial PRR for that period plus the final nine months. Don’t overlook this. A property that was your home for three years out of fifteen years of ownership still qualifies for relief on a meaningful proportion of the gain.
A Worked Example
Sarah bought a flat for £200,000 in 2014. She lived in it as her main home for four years, then moved in with her partner in 2018 and rented the flat out until selling it in 2026 for £350,000.
Her total gain is £150,000, minus £12,000 in allowable costs (stamp duty, legal fees, and a bathroom renovation), leaving a net gain of £138,000.
She owned the property for 12 years. PRR covers the four years she lived there plus the final nine months – a total of 4.75 years out of 12, or roughly 39.6% of the gain.
PRR shelters approximately £54,648. The remaining chargeable gain is around £83,352. After deducting her £3,000 annual exemption, she’s taxable on £80,352.
As a higher-rate taxpayer, she pays 24% – a bill of approximately £19,285.
If she’d transferred a half share to her partner before sale (assuming he’s also a higher-rate taxpayer), they’d have sheltered an extra £3,000 between them, saving £720. If he were a basic-rate taxpayer with room in his band, the saving could be larger still.
Note: Letting Relief doesn’t apply here because Sarah moved out before renting the flat – she wasn’t in shared occupancy with her tenant.
How Double Point Can Help
CGT on property is one of those areas where the difference between planning ahead and reacting after the sale can be worth thousands of pounds. The 60-day reporting clock, the interaction between PRR and letting periods, spousal transfer timing, and the sheer number of allowable deductions all reward careful preparation.
At Double Point, our chartered accountants work with property owners to calculate the gain accurately, claim every available relief, and make sure the reporting is done on time. Whether you’re selling a buy-to-let, an inherited property, or a holiday home, we can help you understand your position before you commit to a sale.
Book a free consultation with us today and let’s make sure your property sale is handled as tax-efficiently as possible.