Gains on residential property are taxed at 18% or 24% depending on your band, after a £3,000 annual exemption — and the report is due long before the tax return.
Selling a buy-to-let, a holiday home or an inherited property that was never your main residence brings a capital gains charge, and it comes with a reporting deadline that catches people who are used to the leisurely rhythm of Self Assessment. A residential property disposal producing a chargeable gain must be reported and the tax paid within 60 days of completion, not by the following January.
That is the single most common failure in this area. The rest is arithmetic, and the arithmetic is where money is left on the table.
Working Out the Gain
| Deduct from the sale proceeds | Notes |
|---|---|
| Purchase price | Or probate value if inherited |
| Buying costs | Stamp duty, legal fees, survey |
| Selling costs | Agent fees, legal fees |
| Capital improvements | Extensions, new kitchens, conversions |
| Annual exemption | £3,000, if not used elsewhere |
| Capital losses | Current year and brought forward |
Improvements are deductible; repairs are not. A new extension is capital. Repainting, replacing a broken boiler with an equivalent one, or fixing a roof is a repair — deductible against rental income at the time, not against the gain. Records going back decades are what make this claimable, which is why the file for a property matters as much as the property.
The Rate Depends on Your Other Income
Residential property gains are charged at 18% within your remaining basic rate band and 24% above it. The gain is added on top of income, so a gain can straddle both. Someone with modest income in the year of sale can have a meaningful slice taxed at the lower rate — which is one reason timing a sale into a low-income year is worth considering, and why pension contributions in the same year can extend the band and reduce the rate on part of the gain.
If You Ever Lived There
Private residence relief exempts the part of the gain relating to periods when the property was your only or main residence, plus a final period of ownership. A property that was your home for five years and then let for ten produces a gain that is partly relieved and partly not, apportioned by time. Where you have owned two properties that could both count as a residence, an election can determine which is treated as the main one, and it has to be made within a time limit of the second becoming available.
Our guide to selling a UK home after moving abroad covers how the relief works for people who have left the country, where the rules differ again.
The 60-Day Report
- It applies where there is a chargeable gain on UK residential property. No gain, or a gain fully covered by relief, generally means no report.
- Sixty days runs from completion, not exchange and not from when the money reaches you.
- It is a separate service from your tax return, and filing one does not remove the need for the other.
- The tax is payable at the same time, based on a reasonable estimate of your income for the year.
- It goes on your return as well, where the final position is settled.
- Penalties apply for late filing, and the deadline is short enough that it needs to be in the conveyancing timetable rather than remembered afterwards.
Reducing the Bill Legitimately
- Use both spouses' exemptions and bands by transferring a share before sale — see splitting income with a spouse.
- Bring forward capital losses, if claimed — see claiming capital losses.
- Find the improvement records. Decades of receipts frequently reduce a gain more than any planning does.
- Time the sale across tax years where there is a choice, particularly against a low-income year.
- Check whether any period qualifies for private residence relief, including periods of absence that can still count.
Frequently Asked Questions
What rate of capital gains tax applies to a second property?
18% within your remaining basic rate band and 24% above it, after the £3,000 annual exemption. The gain is added on top of your income, so it can straddle both rates.
When do I have to report the sale?
Within 60 days of completion where there is a chargeable gain on UK residential property, with the tax payable at the same time. It is a separate service from your tax return, which still has to include the disposal.
Can I deduct the work I did on the property?
Capital improvements yes, repairs no. An extension or conversion is deductible against the gain; redecoration or replacing something with an equivalent is a repair, deductible against rental income instead.
What if I lived in the property for a while?
Private residence relief exempts the part of the gain relating to periods it was your main residence, plus a final period of ownership, apportioned by time over the whole period of ownership.
Related Guides
Keep reading with these related guides and calculators:
- Claiming capital losses — reducing the gain
- Splitting with a spouse — two exemptions and two bands
- Selling after moving abroad — the non-resident version
- Share matching rules — the equivalent for shares
- Rental tax calculator — the income side
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