Capital Gains Tax on Property in 2025-26: Rates, PPR Relief, and the £3,000 Annual Exemption

When you sell a property that is not your only or main home, the profit you make is subject to Capital Gains Tax (CGT). For 2025-26, the rates on residential property are 18% for basic rate taxpayers and 24% for higher rate and additional rate taxpayers. These rates are higher than CGT rates on other assets (10%/20%), reflecting the government's desire to tax property gains more heavily than other investments. This guide explains how CGT on property works, what reliefs are available, and how to report and pay.

Which properties are affected?

CGT on residential property applies to:

• Buy-to-let properties.
• Second homes and holiday homes.
• Properties inherited and then sold (unless they qualify as your main residence).
• A property you moved out of but never sold — if it was your main home but you rented it out, partial relief may apply.

Your only or main home — the property where you habitually live — is generally exempt through Private Residence Relief (PPR). Commercial property is subject to CGT at the standard rates (10%/20%), not the residential property rates.

The annual exempt amount

Each individual has an annual exempt amount of £3,000 for 2025-26. This means the first £3,000 of net gains in a tax year is free of CGT. (Note: this was reduced from £6,000 in 2023-24 and £12,300 in 2021-22.) For a couple each owning a share of a property, each person uses their own annual exempt amount, so a jointly held property can shelter up to £6,000 of combined gains.

CGT rates on residential property in 2025-26

The rate you pay depends on whether the gain, when added to your other taxable income, falls within the basic rate band or above it:

• Gain falling within the basic rate band (up to £50,270 total income + gain): 18%
• Gain above the basic rate band: 24%

Many people pay a blended rate — part at 18% and part at 24% — because their gain straddles the higher rate threshold.

Worked example

Sarah has employment income of £40,000. She sells a buy-to-let property with a gain (after costs) of £50,000. Her annual exempt amount is £3,000.

• Taxable gain: £50,000 - £3,000 = £47,000
• Basic rate band remaining: £50,270 - £40,000 = £10,270
• £10,270 taxed at 18% = £1,849
• £36,730 taxed at 24% = £8,815
• Total CGT: £10,664

Private Residence Relief (PPR)

PPR exempts the proportion of your gain that relates to the period you actually lived in the property as your main home. If you lived there for all of your ownership period, the entire gain is exempt. If you rented it out for part of the time, the relief is proportional.

The final 9 months of ownership always qualify for PPR, even if you are not living there at the point of sale (reduced from 36 months for most people following 2020 changes). This is particularly relevant if you have moved into a new home and are waiting to sell the previous one.

Reporting and paying CGT on property

Since April 2020, UK residents must report and pay CGT on UK residential property disposals within 60 days of completion (reduced from 30 days in the original rules). This is done through HMRC's online Capital Gains Tax on UK Property service. If you also file a Self Assessment return, you must include the disposal there as well — but the 60-day payment deadline is a separate, faster obligation.

Failure to report within 60 days triggers late filing penalties: £100 immediately, daily penalties after 3 months.

Allowable costs to reduce your gain

You can deduct the following from your gross proceeds to calculate the gain:

• The original purchase price (or market value at acquisition if inherited or gifted).
• Stamp Duty Land Tax paid on purchase.
• Legal and estate agent fees on purchase and sale.
• Capital improvement costs (not routine maintenance or repairs).

Frequently asked questions

I sold my buy-to-let at a loss. Can I use this against other gains?

Yes. Capital losses can be offset against capital gains in the same tax year, reducing your taxable gain. Unused losses are carried forward indefinitely and can be used in future years. You must register the loss with HMRC within four years (via Self Assessment or a letter) to preserve your right to use it.