Tax When Selling Property UK: CGT, PPR Relief, and What You Owe

When You Pay No CGT: Private Residence Relief

Private Residence Relief (PRR) exempts the entire capital gain from CGT when you sell a property that has been your only or main residence throughout your period of ownership. If you have lived in the property as your main home from purchase to sale without letting it or using it as a second home, no CGT is due.

PRR also covers the final 9 months of ownership regardless of occupancy. So if you moved out of your main home 6 months ago to rent while you look for your next purchase, that period is still covered by PRR. The 9-month period was reduced from 18 months in April 2020.

When CGT Applies

CGT applies to the chargeable gain when you sell: a buy-to-let property, a second home or holiday home, a property that was your main home for only part of your period of ownership, a property you inherited and have never lived in, or a property you received as a gift and have not used as your main home.

The gain is calculated as the sale price minus the original purchase price (or probate value for inherited property), minus allowable costs. Allowable costs include: purchase and sale legal fees, estate agent fees, and the cost of capital improvements (not maintenance or repairs).

The Annual Exempt Amount

Every individual has a Capital Gains Tax annual exempt amount — £3,000 from April 2024. Gains below this threshold in a tax year are free of CGT. For couples who jointly own a property, each partner has their own allowance, giving a combined exemption of £6,000.

The annual exempt amount has been reduced significantly in recent years (it was £12,300 as recently as 2022–23) and planning around it is therefore less impactful than it once was. However, if you have capital losses from other disposals in the same tax year, these can be offset against your property gain before CGT is calculated.

Partial PRR and Letting Relief

If a property was your main home for part of your ownership but not all of it, PRR applies proportionally. The calculation is: (qualifying days / total days of ownership) x total gain = exempt gain. The qualifying days are the days the property was your main home, plus the final 9 months.

Letting Relief was formerly available to offset gains from periods of letting. Since April 2020, Letting Relief only applies where the owner was in shared occupancy with the tenant during the letting period — so it no longer benefits most landlords selling former main homes that were subsequently let.

The 60-Day Reporting and Payment Requirement

If you sell a UK residential property and a CGT liability arises, you must report and pay the tax within 60 days of completion using the HMRC Online Service for Capital Gains Tax. Failure to report within 60 days attracts automatic penalties, which increase the longer the delay continues.

This is a separate requirement from the annual self-assessment tax return. You must file both: the 60-day return to pay the CGT promptly, and then include the disposal in your annual self-assessment. If your actual tax rate at the end of the year differs from what you estimated at the 60-day stage, HMRC will adjust the liability.

Frequently Asked Questions

Do I pay CGT if I sell my only home? No — if the property has been your only or main residence throughout your entire period of ownership, Private Residence Relief exempts the full gain from CGT. This covers the vast majority of residential property sales in the UK.

How is the gain calculated for CGT purposes? The gain is the sale price minus the original purchase price (or probate value for inherited property), minus allowable costs including legal fees, estate agent fees, and the cost of capital improvements. Maintenance and repair costs are not allowable.

Can my spouse or civil partner help reduce CGT? Yes — transferring a share of ownership to your spouse or civil partner before sale is a legitimate way to use both partners' annual exempt amounts and potentially split the gain across two tax bands. Transfers between spouses are CGT-exempt, but the base cost transfers with the asset.

What is the deadline for reporting and paying CGT on property? 60 days from the completion date. Report via the HMRC Capital Gains Tax UK Property Service online. Penalties apply for late reporting, starting at £100.

Does CGT apply if I give a property away rather than sell it? Yes — gifts of property are treated as if made at market value for CGT purposes. Giving a buy-to-let to your child triggers CGT on the gain as if you had sold it at market value. Only gifts between spouses and civil partners are exempt.

Can I reduce CGT by investing in improvements before I sell? Capital improvements (a new extension, a fitted kitchen that was not there before, structural works) can be added to your base cost and reduce the chargeable gain. Routine maintenance and decorating cannot. Keep receipts for all improvement works.

Related Guides

Free Calculators