Capital Gains Tax on Second Properties in 2026/27

Selling a second property is one of the biggest tax events most people will face. The headline number on the contract is rarely what ends up in your bank account – Capital Gains Tax takes a meaningful chunk of the profit if you don’t plan it well.

The current 2026/27 rates are 18% on residential property gains within your basic rate band and 24% on anything above. The annual exempt amount is still £3,000, frozen at the level set in April 2024. And the 60-day reporting deadline that landlords sometimes still miss continues to bite.

This guide covers what counts as a second property, how the tax is calculated, what you can deduct, which reliefs might apply, and how to handle reporting cleanly.

What Counts as a Second Property

CGT applies when you sell a property that isn’t your main residence. That covers:

• Buy-to-let properties: Whether let to long-term tenants or on short-term platforms.
• Holiday homes: UK or abroad. The Furnished Holiday Lettings regime was abolished from 6 April 2025 for income tax and CGT, so these are now treated like any other second property.
• Inherited properties: Where you didn’t move in as your main home.
• Former homes you kept after moving: Once you’ve moved out and elsewhere becomes your main residence, the clock starts.
• Properties bought to renovate and sell: Unless HMRC treats the activity as a trade, in which case income tax rules apply instead.

The line between “main residence” and “second home” matters because main residences are normally exempt from CGT under Private Residence Relief. HMRC doesn’t take your word for it – the test looks at where you and your family actually live, where the children go to school, where you’re registered to vote and with your GP, where post arrives, and where the council tax bill lands.

If you own more than one home that you genuinely use, you can nominate which one counts as your main residence for CGT purposes. The nomination must be made within two years of the date your circumstances changed (for example, when you bought the second property). Married couples and civil partners can only have one main residence between them.

CGT Rates for 2026/27

The rates depend on your tax band and how much of your gain falls within each:

The annual exempt amount is £3,000 for individuals and £1,500 for most trusts. Couples who jointly own a property each have their own £3,000 allowance, so a 50/50 split gives £6,000 of tax-free gain.

The rate boundary is set by your total taxable income for the year, not your gain alone. To work out what rate applies, take your taxable income after the Personal Allowance and any reliefs, add your taxable gain after the £3,000 exempt amount, and compare the combined figure with the £37,700 basic-rate band for 2026/27.

A worked example. You have gross employment income of £40,000 and a standard Personal Allowance of £12,570, leaving £27,430 of taxable income. You sell a buy-to-let with a £20,000 taxable gain after the annual exempt amount. The total comes to £47,430. The £10,270 of gain that fits below the £37,700 basic-rate ceiling is taxed at 18% (£1,849), and the £9,730 above it is taxed at 24% (£2,335). Total CGT bill: £4,184.

If your taxable income alone is already above £37,700, the entire taxable gain is at 24%.

Calculating Your Gain

The basic equation is simple: sale price minus purchase price minus allowable costs equals the gain. The detail is where money is won or lost.

Acquisition Costs

You can deduct what you spent buying the property:

• Original purchase price
• Stamp Duty Land Tax paid when you bought it
• Legal and conveyancing fees on the purchase
• Surveyor, valuer, legal adviser and other professional fees directly referable to acquiring the property, plus valuation or apportionment costs needed for the CGT computation

Finance costs such as mortgage arrangement fees aren’t normally allowable in the CGT calculation, even though they sit on the purchase paperwork. If you’re not sure whether a specific cost qualifies, check it before you file.

For inherited properties, the “purchase price” is the market value at the date of death, not what the original owner paid. This is called the probate value and is one of the more useful features of the system – if a property has gone up significantly since you inherited it, only the post-inheritance growth is taxed.

Capital Improvements

You can deduct the cost of work that increased the property’s value or extended its life, including:

• Building extensions, loft conversions and structural changes
• New kitchens, bathrooms and central heating systems where these are an upgrade, not a like-for-like replacement
• Double glazing, rewiring and new roofs where these add value
• Planning and architect fees for capital projects

What you can’t deduct is regular maintenance – decorating, garden upkeep, fixing things that break, like-for-like replacements, or anything done by a previous owner. The distinction between “capital improvement” and “repair” is one HMRC scrutinises, so keep your invoices and any planning consents.

Disposal Costs

When you sell, you can deduct:

• Estate agent fees and marketing costs
• Legal fees on the sale
• Professional valuation fees needed for the disposal or CGT computation

Again, finance-related costs such as mortgage redemption penalties aren’t normally deductible against a gain. They’re costs of ending the loan, not costs of selling the asset.

The total of acquisition costs, improvements and disposal costs comes off the sale price to give the gross gain. Your £3,000 annual exempt amount then comes off the gross gain to give the taxable amount.

Private Residence Relief and Partial Reliefs

If the property was your main home at any point during your ownership, you may qualify for partial Private Residence Relief. The relief covers:

• The period you actually lived there as your main home
• The final nine months of ownership, regardless of whether you were living there or not. Different final-period rules can apply if the seller is disabled or in long-term residential care.
• Up to the first 2 years of ownership, if you couldn’t move in immediately because the property was being built, renovated, or you couldn’t sell your previous home – provided you did move in within that period

The relief is calculated proportionately. If you owned the property for 10 years and lived in it for 4, plus the automatic final nine months, the exempt portion is roughly (4 years + 9 months) ÷ 10 years – just over 47% of the gain.

A few other reliefs sometimes apply:

• Lettings Relief: Restricted since April 2020 to landlords in shared occupancy with the tenant. Most “I let my old flat out after I moved” cases no longer qualify.
• Spouse transfers: Transfers between spouses or civil partners are CGT-neutral. Moving a share before sale can use the second person’s exempt amount and basic rate band, but the transfer needs to be a genuine gift completed before the sale contract becomes unconditional – usually before exchange in England and Wales.
• Losses: Capital losses can be set against gains in the same year or carried forward indefinitely if reported to HMRC.

Reporting and Paying

CGT on UK residential property is reported separately from your normal Self Assessment and on a much tighter deadline than the rest of your tax year. You have 60 days from completion to:

• Report the gain through HMRC’s online CGT on UK Property service
• Pay the CGT due in full

A few key points on who has to file:

• UK residents with CGT to pay: Must use the 60-day return. UK residents generally don’t need to file a UK property return if no CGT is due – for example, where gains are within the annual exempt amount, covered by losses, or fully relieved.
• Non-UK residents: Must report any UK property or land disposal within 60 days, whether or not there’s tax to pay.
• Self Assessment filers: Still need to include the disposal on their tax return for the year – the 60-day report and the Self Assessment don’t replace one another.

Missing the deadline triggers automatic penalties starting at £100, with daily penalties and percentage-based penalties on the tax due if delays continue.

Planning to Reduce Your Bill

A few legitimate strategies can reduce CGT on a second property sale:

• Use both spouses’ allowances and bands: Transferring a share to a lower-earning spouse before exchange can shift gain into the 18% band and use a second £3,000 exempt amount.
• Time the sale across tax years: If you’ve already used your annual exempt amount or are pushed into the 24% rate this year, delaying completion into the new tax year can save thousands.
• Document improvements properly: Reconstruct your improvement spend from invoices and bank statements early – years later, evidence is much harder to find.
• Consider losses elsewhere in your portfolio: Shares or other assets sitting on losses can be sold to offset the property gain in the same tax year.

For landlords sitting on substantial unrealised gains, the bigger structural question is whether to hold the property personally or through a limited company. The answer depends on rental yield, leverage, your long-term plans, and the cost of restructuring. Our landlord’s guide to 2026 covers the wider tax position.

How Double Point Can Help

CGT on a second property sale rewards preparation and punishes last-minute decisions. A few hours of planning before you put the property on the market often saves more than a few thousand pounds compared with leaving it until completion.

At Double Point, our chartered accountants help property owners across the UK handle CGT on second-home, buy-to-let and inherited property sales – from running the calculation, identifying all the allowable deductions, and structuring the disposal to the 60-day reporting itself.

Book a free consultation and we’ll review your position before you exchange contracts.