Key takeaways
- Gains on second homes and buy-to-let property are taxed at 18% within the basic rate band and 24% above it in 2026/27.
- You can deduct purchase and selling costs, stamp duty and the cost of improvements, but not repairs or mortgage interest.
- Private residence relief may cover part of the gain if you ever lived there as your main home, including the final 9 months.
- UK residents must report and pay CGT on UK residential property within 60 days of completion.
- Transferring part of the property to a spouse before sale can use two annual exempt amounts and two basic rate bands.
If you sell a property that is not your main home, such as a holiday cottage, a flat you let or an inherited house, any gain is liable to Capital Gains Tax (CGT). The rules are the same whether the property is let or empty, though letting brings its own records. Landlords should also read our guide to CGT for landlords.
Rates for 2026/27
| Your gain falls | Rate |
|---|---|
| Within your unused basic rate band | 18% |
| Above the basic rate band | 24% |
The higher rate on residential property fell from 28% to 24% on 6 April 2024, and since 30 October 2024 the same rates apply to all assets. The first £3,000 of gains each year is covered by the annual exempt amount.
Working out the gain
| Item | Treatment |
|---|---|
| Sale price | Start here (or market value, if you give the property away or sell to a connected person) |
| Purchase price | Deduct |
| Buying costs: stamp duty, legal fees, survey | Deduct |
| Selling costs: estate agent and legal fees | Deduct |
| Improvements: extensions, loft conversions, new kitchen where it adds value beyond replacement | Deduct |
| Repairs and maintenance, redecoration | Not deductible for CGT (may be claimed against rental income instead) |
| Mortgage interest and finance costs | Not deductible |
Example
Laura sells a flat she has let since buying it. She bought it for £180,000 in 2012 with £3,500 of costs including stamp duty, spent £20,000 on an extension, and sells it in 2026/27 for £295,000 with £5,500 of selling costs. Her salary uses all of her basic rate band.
| Step | Amount |
|---|---|
| Sale price | £295,000 |
| Less purchase price and costs | (£183,500) |
| Less improvement | (£20,000) |
| Less selling costs | (£5,500) |
| Gain | £86,000 |
| Less annual exempt amount | (£3,000) |
| Taxable gain | £83,000 |
| CGT at 24% | £19,920 |
Using private residence relief on a second home
If you lived in the property as your main residence at any time, part of the gain is exempt, including the final 9 months of ownership. If you have two homes at the same time, you can nominate which one is your main residence for CGT, in writing within two years of starting to have two homes. A carefully timed nomination can bring the final 9 months exemption into play for the second home. See private residence relief.
Reducing the tax
- Spouse and civil partner transfers: transfers between spouses are free of CGT. Putting a share of the property into joint names before the sale can use both partners’ £3,000 exemptions and the lower-earning partner’s basic rate band. The transfer must be genuine and outright, and stamp duty can apply if there is a mortgage.
- Timing: selling in a year when your income is lower, for example after retirement, can mean more of the gain is taxed at 18%.
- Capital losses: losses on other assets in the same year, or brought forward, reduce the taxable gain; see CGT loss relief.
- Records of improvements: keep invoices for every capital improvement; without them the cost may be refused.
Reporting and paying within 60 days
If you are UK resident and sell UK residential property with CGT to pay, you must:
- report the sale to HMRC using a Capital Gains Tax on UK property account, and
- pay the estimated tax
within 60 days of the completion date. If you file Self Assessment, you also include the gain on your return, and any difference is settled through the return. Late reporting brings penalties and interest. See reporting and paying CGT.
Non-UK residents must report every disposal of UK property within 60 days, even if no tax is due; see CGT for non-residents.
Frequently asked questions
What is the CGT rate on a second home in 2026/27?
18% for gains within your basic rate band and 24% above it.
Can I deduct mortgage interest from my capital gain?
No. Mortgage interest is not an allowable cost for CGT. Purchase, selling and improvement costs are.
How long do I have to pay CGT on a second home?
You must report and pay within 60 days of completion if you are UK resident and tax is due.
Can I avoid CGT by moving into my second home?
Living in it genuinely as your main residence can make that period exempt, plus the final 9 months, but the rest of the gain stays chargeable. HMRC looks closely at short or token occupation.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.