Selling a second home or a buy-to-let is rarely as simple as banking the profit. Capital Gains Tax (CGT) usually takes a slice, the reporting window is tight, and the rules changed materially in October 2024 and again from April 2026.
This guide explains how Capital Gains Tax on a second home works for 2026/27, the current rates and allowances, the reliefs that still apply, the 60-day HMRC reporting rule, and the practical steps landlords use to keep their bill in check.
Quick AnswerCapital Gains Tax on a second home in the UK is 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers in 2026/27, after deducting the £3,000 annual exempt amount. UK residents must report the gain and pay any tax due within 60 days of completion using HMRC’s online Capital Gains Tax on UK property service.
Estimate your bill in 30 seconds: Try our free 2026/27 CGT on property calculator
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Selling a Second Home: Taxes You Will Pay in 2026/27
When you sell a second home in the UK, four taxes and deadlines usually come into play at once:
- Capital Gains Tax on the profit, 18% or 24% for 2026/27, after your £3,000 annual exempt amount
- The 60-day HMRC deadline to report and pay CGT after completion, through the Capital Gains Tax on UK property service
- Stamp Duty Land Tax, not on this sale, but on your next purchase if you are replacing the second home (the additional-property surcharge still applies)
- Self Assessment reconciliation, the CGT paid at 60 days is a payment on account; the final figure is settled through your January tax return
How Capital Gains Tax on a Second Home Works
Capital Gains Tax is charged on the gain, the profit, when you sell or dispose of an asset that has risen in value. You are taxed on the profit, not the sale price.
For property, CGT usually applies to:
- Second homes and holiday homes
- Buy-to-let properties
- Inherited properties that you later sell
- Commercial premises and land
- Former main homes that you later let out
A property that is not your only or main home is treated as a secondary residence for CGT purposes. Your main home is normally exempt through Private Residence Relief under section 223 TCGA 1992, provided you lived there throughout ownership, did not use part of it exclusively for business, and did not let out more than a lodger’s share.
When Do You Pay CGT on a Second Property?
You owe CGT when you dispose of a property that is not your only or main home. “Disposal” covers more than a sale. It includes gifts (other than to a spouse or civil partner), transfers, and, in some cases, compensation for a property that has been lost or destroyed.
Two homes and the main residence election. If you own two or more homes, you can nominate one as your main residence for Capital Gains Tax (CGT) purposes. This is known as a section 222 election (s.222(5)(a) TCGA 1992). The nomination must normally be made within two years of the date your combination of residences changes—usually the date you acquired or began using the second home. If you miss that window, the main residence is typically determined by the facts of occupation, based on where you actually lived and where your life was centered.
However, under section 222(5A) TCGA 1992, a late nomination may still be permitted if you were unaware of the need to nominate and held a negligible or very low capital value interest in all but one of your residences during that period.
The nine-month rule when moving house. If you sell your old home after buying a new one, the final nine months of ownership are always covered by Private Residence Relief as deemed occupation, even if you were not living there. This period was reduced from 18 months by Finance Act 2020 and has stayed at nine months since.
CGT Rates on Residential Property for 2026/27
Taxpayer band | CGT rate on residential property |
Basic-rate (total income + gain up to £50,270) | 18% |
Higher or additional-rate (above £50,270) | 24% |
Annual exempt amount (per individual) | £3,000 |
Reporting deadline (UK residents, tax due) | 60 days from completion |
Since 30 October 2024, residential property rates and non-property rates have been aligned at 18% / 24%. The previous 28% higher rate for residential property has gone. Business Asset Disposal Relief rose to 18% from 6 April 2026 (up from 14% in 2025/26).
How the band split works. Your gain is stacked on top of your taxable income for the year. Any part of the gain sitting inside your unused basic-rate band is taxed at 18%; anything above is taxed at 24%. So a middle-income earner with a large gain often pays a mix of both rates.
How Much Is Capital Gains Tax on a Second Property? (2026/27 Example)
Step 1 — Work Out Your Chargeable Gain
Chargeable gain = Sale proceeds − Purchase price − Allowable costs
Costs you can deduct:
- Solicitor and conveyancing fees on both purchase and sale
- Estate agent fees
- Survey and valuation fees
- Stamp Duty Land Tax paid on purchase
- Capital improvements, extensions, loft conversions, new kitchens, new bathrooms, or anything that adds lasting value to the property
Costs you cannot deduct:
- General repairs and maintenance
- Redecoration and repainting
- Loose furniture and fittings
- Mortgage interest
- Letting-agent management fees (these belong to the rental income calculation)
Step 2, Apply the £3,000 Annual Exempt Amount
Every individual gets a £3,000 tax-free allowance for 2026/27. Joint owners each get their own £3,000, so a married couple owning a property 50/50 can shelter £6,000 between them.
The allowance is “use it or lose it.” You cannot roll it forward or transfer it to your spouse.
Step 3 — Apply the Rate Based on Your Income
Add your taxable gain (after the exempt amount) to your other taxable income for the year. The 18% rate applies up to £50,270 combined; the 24% rate applies above.
Worked Example
You bought a buy-to-let for £180,000 in 2018. Purchase-side costs (SDLT, solicitor, survey) came to £8,500. You spent £15,000 on a new kitchen and bathroom. You sold it in 2026 for £260,000, with £7,000 in selling costs.
Item | Amount |
Sale proceeds | £260,000 |
Less: Purchase price | −£180,000 |
Less: Purchase costs (SDLT, solicitor, survey) | −£8,500 |
Less: Capital improvements | −£15,000 |
Less: Selling costs | −£7,000 |
Chargeable gain | £49,500 |
Less: Annual exempt amount | −£3,000 |
Taxable gain | £46,500 |
If your other taxable income is £35,000, you have £15,270 of basic-rate band left (£50,270 − £35,000). The gain is split:
- £15,270 at 18% = £2,748.60
- £31,230 at 24% = £7,495.20
- Total CGT: £10,243.80
The tax must be reported and paid within 60 days of completion.
Calculate your capital gains tax
When Do You Pay CGT After Selling a Second Home? The 60-Day Rule
Since 27 October 2021, UK residents disposing of UK residential property with CGT to pay must:
- Report the disposal through HMRC’s Capital Gains Tax on UK property online service, and
- Pay an estimate of the tax due,
within 60 days of the completion date, not the exchange date.
You still report the same disposal on your Self Assessment return the following January. The 60-day payment is treated as a payment on account and is reconciled against the final Self Assessment figure.
No 60-day return is needed if the gain is fully covered by Private Residence Relief, capital losses or your annual exempt amount. Non-UK residents, however, must report every UK land or property disposal within 60 days, whether tax is due or not.
Late Filing Penalties (2026/27)
- £100 automatic penalty for missing the 60-day deadline
- After 6 months: further £300 (or 5% of the tax due if higher)
- After 12 months: another £300 (or 5% of the tax due if higher)
- Interest also accrues on unpaid tax from the deadline
Given how quickly penalties escalate, most landlords set up their Government Gateway account well before completion.
Private Residence Relief (PRR) Explained
If a property was your only or main home for part of the ownership period, PRR reduces your gain proportionally under section 223 TCGA 1992.
How it works. PRR covers the years you actually lived there as your main home, plus the final nine months of ownership as deemed occupation, even if the property was let during that time.
Example. You buy in June 2015, live there until June 2020, then let it out until you sell in June 2027. That is 12 years of ownership. You lived there for 5 years, plus the final 9 months are automatically covered, so 5 years 9 months (about 48%) of the gain is exempt. The remaining 52% is chargeable.
Extended final period. If you are in long-term residential care or have a qualifying disability, the final period extends to 36 months.
Business use. If part of your home is used exclusively for business, that portion is not covered by PRR. Occasional remote working from a bedroom-office does not count as exclusive business use.
Nominations for two homes. Where you own two homes, the section 222 election window is two years from the date your combination of residences changes. The choice does not have to be where you spend the most time, but there must be some genuine occupation.
Read: details about private residence relief.
Lettings Relief: What Actually Remains?
Lettings relief used to shelter up to £40,000 per owner where a former main home was later let out. Since 6 April 2020, that generous version has gone.
Today, lettings relief applies only where you shared occupation of the property with your tenant, a lodger-style arrangement, during the letting period. If you moved out and let the whole property to a tenant, lettings relief is not available.
This change caught a lot of accidental landlords by surprise. Anyone still relying on pre-2020 examples should recalculate before selling.
Inherited Properties
You do not pay CGT when you inherit. The property is “rebased” to its probate value, its market value at the date of death. If you later sell, CGT is charged on the growth between that probate value and the sale price, minus allowable costs and your exempt amount.
Your options after inheriting include:
- Sell soon after probate. If values have not moved much, the gain, and the tax, may be small.
- Move in as your main home. You then start clocking up PRR for future years of occupation.
- Let it out. Rental income is taxed under Income Tax; CGT applies later on the growth from the probate value to sale.
If you already own a home, you have two years from the inheritance date to make a section 222 election over which is your main residence.
Gifts and Transfers Between Family Members
Gifting a property is treated as a disposal at market value for CGT, even though no money changes hands. That can leave the donor with a CGT bill on a paper gain.
- Spouses and civil partners. An inter-spouse transfer between spouses living together is on a no-gain, no-loss basis. No CGT arises on the transfer, but the receiving spouse takes on your original base cost. This is a common planning route to use both £3,000 exemptions and both rate bands.
- Gifts to children or other relatives. Treated as a disposal at market value. CGT is due on any uplift. The gift may also be a Potentially Exempt Transfer (PET) for Inheritance Tax, if the donor dies within seven years, the value comes back into the estate.
- Gift with reservation of benefit (GWROB). If parents gift the home to their children but continue to live there rent-free, HMRC will usually treat the property as still part of the parents’ estate for IHT. The interaction with Income Tax (pre-owned assets) can be sharp.
Anyone planning to gift or transfer property should take professional advice before completing the paperwork.
Non-UK Residents Selling UK Property
Non-residents have been within scope of UK CGT on UK residential property since 6 April 2015 and on UK commercial property and land since 6 April 2019. The same 18% / 24% rates and £3,000 exempt amount apply.
Two points to watch:
- You must report every disposal within 60 days, whether tax is due or not.
- For property held before the relevant date, you can usually use rebasing, the market value at 5 April 2015 (residential) or 5 April 2019 (commercial), as your cost, rather than the original purchase price. Straight-line time apportionment and retrospective basis calculations are also available in some cases.
Setting up a Government Gateway account can be harder without a UK passport. If you cannot verify online, HMRC accepts a paper return, but processing takes longer, so start early.
Furnished Holiday Lets: What Changed in April 2025
The Furnished Holiday Let (FHL) regime was abolished from 6 April 2025 by Finance (No.2) Act 2024. FHL properties are now taxed as ordinary residential property.
The main consequences for CGT are:
- Business Asset Disposal Relief no longer applies to FHL disposals
- Rollover relief and gift holdover relief no longer apply
- Capital allowances protections have gone
- Disposals on or after 6 April 2025 are taxed at 18% / 24% with the £3,000 exempt amount
If you owned an FHL property, the planning options have narrowed considerably.
How to Avoid or Reduce Capital Gains Tax on a Second Home (7 Legal Strategies)
Complete avoidance of CGT on a second home is only possible where Private Residence Relief covers the whole gain or the gain sits inside your £3,000 annual exempt amount. In every other case the goal is to reduce, not eliminate, the bill. None of the strategies below are avoidance schemes, all are standard tax planning within HMRC rules.
- Use both spouses’ exempt amounts and rate bands. An inter-spouse transfer before completion can bring a second £3,000 into play and use a lower earner’s basic-rate band on part of the gain.
- Claim every allowable cost. Solicitor fees, estate agent fees, SDLT, survey fees and evidenced capital improvements all reduce the gain. Missing one costs real money.
- Distinguish improvements from repairs. A new extension is a capital improvement; repointing brickwork is a repair. Only improvements are deductible. Keep invoices and before/after photos.
- Offset carried-forward capital losses. Losses on other assets (property, shares, crypto) can be set against your gain. Losses must be reported to HMRC within four years of the loss year and can then be carried forward indefinitely.
- Time the sale to your income year. If your income is lower in one tax year, a career break, retirement, parental leave, completion in that year may keep more of the gain inside the 18% band.
- Use the final nine months of PRR. If you are re-letting a former home, timing completion within nine months of moving out preserves full PRR for that period.
- Get the main residence election right. If you own two homes, the section 222 window is two years from the date your combination of residences changes. A well-timed election on the property with the larger expected gain can be worth a great deal.
Other Taxes to Bear in Mind
CGT is rarely the only tax on a property. Depending on your situation, you may also face:
- Stamp Duty Land Tax (SDLT), on purchase, with a surcharge for additional properties
- Income Tax on rental profits, while you let the property
- Council Tax, including empty-property and second-home premiums in some areas
- Inheritance Tax, on the estate at death
- Corporation Tax, if the property is held inside a limited company
Landlords holding property through a limited company pay Corporation Tax on gains rather than CGT.
When to Get Professional Help
CGT on a second home is one of the areas where the difference between a rough calculation and a proper one shows up in real money. Consider talking to a tax adviser if:
- You are selling a former main home that has been let out
- You own two or more properties and have not made a section 222 election
- You have inherited a property or received one as a gift
- You are non-resident, or the property is held through a company or trust
- You expect the taxable gain to push you into the higher-rate band
- You are close to completion and have not set up your Government Gateway account
Missing the 60-day deadline, misclaiming lettings relief under the old rules, or forgetting a capital improvement are the three mistakes we see most often, all fixable with a review before completion.
Contact us for maximum tax saving on capital gains tax
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