Capital Gains Tax when selling a second home or buy-to-let

The first £3,000 of gains each tax year is tax-free (the Annual Exempt Amount). For most individuals selling an ordinary second home or investment, the rate then depends on your income: 18% on any gain that falls within your remaining basic rate band, and 24% on anything above it. These are the main rates that apply to shares and most other chargeable assets too, since property lost its own higher rate from 30 October 2024. They're not universal, though: trustees and personal representatives generally pay 24% regardless of income, and reliefs like Business Asset Disposal Relief can give an 18% rate on qualifying business gains. For the full mechanics of the 18%/24% split, see our Capital Gains Tax Calculator.

If you bought the property, your gain is normally the sale price minus what you paid for it, minus allowable costs: stamp duty and legal fees when you bought, estate agent and solicitor fees when you sold, and the cost of capital improvements that add lasting value, such as an extension or a loft conversion that creates extra living space. Routine maintenance, redecorating, mortgage interest, and like-for-like repairs, such as replacing an existing roof, don't count, even when modern materials are used.

If you inherited the property rather than buying it, your starting point is different: your acquisition cost is normally the property's market value at the date of death (the probate value), not whatever the person you inherited it from originally paid. So if your grandfather bought a house for £50,000 decades ago and you inherited it when it was worth £300,000, your gain when you sell is measured from that £300,000 figure, not the original £50,000.

If you're a UK resident selling UK residential property and there's Capital Gains Tax to pay, you must report the sale and pay the tax within 60 days of completion, not exchange of contracts, using HMRC's UK Property Reporting Service. This is separate from, and earlier than, your normal Self Assessment deadline.

Miss it and you'll face an immediate £100 penalty. If the return is still outstanding 3 months after the deadline, daily penalties of £10 a day kick in for up to 90 days (up to £900 in total), and further penalties apply if it's still outstanding after 6 and 12 months, on top of interest on the unpaid tax. Given how easy it is to miss a 60-day window during a house move, it's worth reporting as soon as the sale completes.

If your total gains for the year are within your £3,000 Annual Exempt Amount, you generally don't need to report through the 60-day property service. If you're unsure whether your gain is covered, it's worth checking with HMRC or an adviser before the deadline passes rather than after.

For gains on assets other than UK property, like shares, the 60-day service doesn't apply. You'd normally report those through Self Assessment, or through HMRC's real-time Capital Gains Tax service if you don't otherwise need to file a return.

Private Residence Relief exempts your only or main home from Capital Gains Tax entirely, provided it's been your main home for the whole time you've owned it, you haven't let part of it out as a separate letting, you haven't used part of it exclusively for business, and the grounds are under 5,000 square metres. A single lodger living as part of your household doesn't normally count against this and shouldn't restrict the relief; having more than one lodger, or running part of the property as a separate letting, is more likely to. If any of those don't apply, for example you lived elsewhere for part of the ownership period, only part of the gain may be exempt, and it's worth checking HMRC's detailed guidance for your specific situation.