Capital Gains Tax on a second home or buy-to-let
The short answer: when you sell a second home or buy-to-let, you pay Capital Gains Tax on the profit at 18% on any part that fits in your unused basic-rate band and 24% on the rest. The first £3,000 of gains each year is tax-free. You must report and pay within 60 days of completion. Your main home is usually exempt.
A worked example
You bought a flat for £200,000 and sell it for £300,000, with £12,000 of buying, selling and improvement costs:
| Gain: £300,000 − £200,000 − £12,000 | £88,000 |
| Less annual exempt amount | −£3,000 |
| Taxable gain | £85,000 |
How much tax depends on your other income in the year of sale:
| Your taxable income | CGT on £88,000 |
|---|---|
| £20,000 | £18,584 |
| £35,000 | £19,484 |
| £50,000 | £20,384 |
| £80,000 | £20,400 |
Lower earners pay less because part of the gain fills their basic-rate band at 18%. Above £50,270, it is all 24%.
Tax at different gains
| Gain after costs | Income £35,000 | Income £60,000 |
|---|---|---|
| £20,000 | £3,164 | £4,080 |
| £50,000 | £10,364 | £11,280 |
| £100,000 | £22,364 | £23,280 |
| £200,000 | £46,364 | £47,280 |
What you can deduct
- Buying costs: stamp duty, solicitor and survey fees.
- Selling costs: estate agent and solicitor fees, and an EPC.
- Improvements: an extension, loft conversion or conservatory, if still in place when you sell.
- Not deductible: mortgage interest, repairs, decorating and running costs. Landlords claim some of these against rent instead.
If it used to be your home
Private Residence Relief covers the period the property was your main home, plus the final 9 months of ownership in every case. If you lived in a property for 4 of 10 years and then let it, the relief covers 4 years and 9 months, so you pay tax on the remaining 5 years and 3 months share of the gain. Letting relief now only applies if you shared the home with a tenant while living there.
If you have two homes you live in, you can nominate which is your main home for CGT, but you must do it within two years of the change.
Reporting and paying within 60 days
- Create a Capital Gains Tax on UK property account on GOV.UK.
- Report the sale and pay the estimated tax within 60 days of completion.
- Include it on your Self Assessment return, if you file one, which squares up the final amount.
Late reporting brings penalties and interest. Keep records of the purchase, costs and improvements.
Ways to reduce the bill
Timing the sale for a lower-income year, using a spouse's allowance and band, and offsetting losses can all help. See how to reduce Capital Gains Tax. For the buying side, see stamp duty on a second home, and for letting, how rental income is taxed.
Inherited property
If you inherit a property, its cost for CGT is its value at the date of death, usually the probate value. If you sell soon after for about the same amount, there is little or no gain. If you keep it as a second home or let it out, any rise in value from that date is taxable when you sell.
Giving a property to your children
A gift of a second home or rental property is treated as a sale at market value, so you may owe CGT even though you receive nothing. Private Residence Relief applies only for the time it was your main home. The gift is also a potentially exempt transfer for Inheritance Tax, and if you keep using the property without paying a market rent, it stays in your estate. Get advice before gifting property.
Property losses
If you sell for less than you paid plus costs, the loss can be set against other gains in the same year or carried forward. Report it within four years so you can use it later.
Selling as a couple
If you own the property jointly with a spouse or civil partner, each of you is taxed on your share of the gain, using your own £3,000 exempt amount and basic-rate band. Transferring a share to a lower-earning spouse before a sale can reduce the tax, but the transfer must be genuine and completed before contracts are exchanged. For a buy-to-let, it also changes how the rental income is taxed.
Related reading: Capital Gains Tax on divorce.
Rates for 2026/27. Scottish taxpayers use UK bands for Capital Gains Tax. This is general information, not tax advice.
Common questions
How much Capital Gains Tax do I pay on a second home?
18% on any gain that falls within your unused basic-rate band and 24% on the rest, after the £3,000 annual exempt amount. On an £88,000 gain, a higher-rate taxpayer pays £20,400.
When do I have to pay CGT on a property sale?
You must report the sale and pay the tax within 60 days of completion, using HMRC’s UK property reporting service. This is separate from your Self Assessment return.
What costs can I deduct from the gain?
Buying and selling costs such as stamp duty, solicitor and estate agent fees, plus the cost of improvements like an extension or loft conversion. Repairs and running costs cannot be deducted.
Do I pay CGT if the second home used to be my main home?
Private Residence Relief covers the years it was your main home, plus the final 9 months of ownership. You pay CGT only on the share of the gain from the other years.
Can a married couple each use their CGT allowance?
Yes. If you own the property jointly, each of you can use your £3,000 exempt amount and your own basic-rate band. Transfers between spouses are tax-free, but must be genuine.