Sell a buy-to-let or second home at a profit and a separate Capital Gains Tax regime kicks in, with its own rates and a 60-day deadline that catches a lot of people out.
Selling an investment property can land you with a tax bill long before your normal Self Assessment is due, and at rates that differ from those on shares or other assets. Residential property Capital Gains Tax is its own corner of the CGT regime, with distinct rates and a tight 60-day deadline that surprises many sellers. Get it wrong and HMRC charges penalties before you have even thought about your annual return.
Not every property sale is taxed. Your only or main home is normally covered by Private Residence Relief, so selling it produces no CGT and no report. The residential property regime instead targets property where that relief does not fully apply: buy-to-let flats, second homes, holiday lets, and inherited property you later sell. It is a sub-set of the wider Capital Gains Tax rules, but with its own rates and reporting deadline.
CGT is charged on the gain, not the sale price. You take the proceeds and subtract what you originally paid, plus allowable costs such as purchase fees, the cost of capital improvements, and selling costs like estate agent and legal fees. Note that the Stamp Duty you paid when you bought the property counts as an acquisition cost and reduces the gain.
Residential property gains are taxed at higher rates than most other assets, and the way they stack on top of your income matters.
| Band the gain falls in | 2025/26 rate |
|---|---|
| Within your basic-rate band | 18% |
| Above the basic-rate band | 24% |
Everyone has an annual exempt amount of £3,000 for 2025/26, deducted before tax is worked out. This allowance has been cut sharply, from £12,300 in 2022/23 to £6,000, and now £3,000, so far more modest property gains create a real bill. The gain effectively sits on top of your income: where it falls between the bands decides how much is taxed at 18% versus 24%.
Take Tom, a higher-rate taxpayer, who sells a buy-to-let flat in 2025/26. He bought it for £200,000, paid £7,000 Stamp Duty and fees on purchase, spent £13,000 on a capital improvement (a loft conversion), and sells for £290,000 with £5,000 of legal and agent fees.
| Step | Amount |
|---|---|
| Sale proceeds | £290,000 |
| Less purchase price | £200,000 |
| Less Stamp Duty and purchase fees | £7,000 |
| Less capital improvement | £13,000 |
| Less selling costs | £5,000 |
| Gain | £65,000 |
| Less annual exempt amount | £3,000 |
| Taxable gain | £62,000 |
| CGT at 24% (higher-rate band) | £14,880 |
Because this is residential property, Tom must report the gain and pay the £14,880 within 60 days of completion through HMRC's online UK Property service, not wait for his Self Assessment. The Capital Gains Tax calculator handles this arithmetic for any figures.
The 60-day deadline is where most sellers come unstuck. It runs from the completion date, not from the end of the tax year, so the report and payment can fall due months before your annual return. Missing it brings late-filing penalties and interest in their own right. Couples can soften the overall bill: transfers between spouses or civil partners are made on a no-gain, no-loss basis, so moving a share of the property before sale lets a couple use two £3,000 allowances and potentially two basic-rate bands. Realising gains across different tax years can also spread the allowances further.
The 60-day clock starts at completion, not at the tax-year end. Plan the report before you complete, because a late filing is penalised even if your Self Assessment is months away.
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