Capital Gains Tax (CGT) on investment property applies when landlords, buy-to-let investors or second-home owners sell a property for more than it cost (after allowable expenses).
This guide covers what counts as a disposal, current CGT rates, key reliefs, allowable costs, worked examples and reporting deadlines — helping you stay compliant and keep more of your return.
Book a free consultation with Naail & Co — we’ll review your figures and help you minimise CGT legally and efficiently.
Capital Gains Tax (CGT) is charged on the profit you make when disposing of property — including investment homes, second homes, and transfers to family. With connected-party transfers, HMRC uses market value even if you sell the property for less.
CGT events cover sales, gifts, part-sales, and changes to ownership rights. Properties that were your main home at any point may qualify for Private Residence Relief (PRR), reducing the taxable gain.
UK residents pay CGT on worldwide gains, but this guide focuses on UK property.
Non-residents are also within scope for UK land/property; special reporting applies. (GOV.UK)
60-day reporting & payment (UK residential property): If you sell a UK residential property that creates a CGT liability, you must report and pay via HMRC’s online service within 60 days of completion (30 days for completions between 6 Apr 2020 and 26 Oct 2021). You’ll still include the figures on your Self Assessment later. Penalties and interest apply for late reporting/payment. (GOV.UK)
CTA: Need help with the 60-day return? Get in touch with Naail & Co to book a free initial consultation.
Individuals — residential property gains (from 6 Apr 2025 onwards):
18% on gains falling in your basic-rate band
24% on gains falling in higher/additional-rate bands
(You’ll blend rates if the gain straddles bands.) (GOV.UK)
Annual Exempt Amount (AEA): For 2024/25 the AEA is £3,000 per individual (lower than prior years). Unused AEA cannot be carried forward. (GOV.UK)
Trustees: Different rates/allowances apply. If you hold property in a trust, take advice. (GOV.UK)
CTA: Want to optimise how your gain falls across tax bands? Get in touch with Naail & Co to book a free initial consultation.
If the property was your only or main residence at any time, the period you lived there plus the final 9 months of ownership are exempt (36 months in some limited cases such as certain disabled persons or those moving into care). Time-apportionment applies when you lived there for part of ownership and let or left it empty for the rest. (GOV.UK)
Letting Relief (post-April 2020 rule)
Letting Relief is now restricted and generally only applies where there was shared occupancy (you and a tenant living in the property at the same time). For disposals on/after 6 April 2020, it does not cover periods when the whole dwelling was let and you were not in residence. (GOV.UK)
Losses & Other Points
Brought-forward capital losses can reduce current gains.
Spousal transfers are generally no-gain/no-loss — a planning point to use both AEAs and rate bands.
Charitable gifts of assets are generally exempt.
CTA: Think your property qualified as your main residence for part of the time? Get in touch with Naail & Co to book a free initial consultation.
You can deduct:
Acquisition costs: purchase price, Stamp Duty Land Tax (SDLT), legal and professional fees.
Disposal costs: estate agent, legal, valuation fees.
Capital improvements that add value or create something new (e.g., an extension or new kitchen where you replaced like-for-better). Routine repairs and maintenance are not CGT-deductible (though they may have been deductible against rental income when incurred). (GOV.UK)
Step 1 — Calculate proceeds:
Sale price (or market value if connected-party) minus selling costs.
Step 2 — Deduct base cost & capital improvements:
Purchase price + SDLT + legal fees + qualifying enhancements.
Step 3 — Work out the gross gain:
Proceeds − (base cost + improvements + selling costs).
Step 4 — Apply PRR time-apportionment (if ever your main residence):
Total ownership months (A)
Main residence months (B)
Final period exemption (C) = 9 (if PRR applies)
Exempt months = B + C
Taxable months = A − (B + C)
Chargeable portion of gain = Gross gain × (Taxable months ÷ A) (GOV.UK)
Step 5 — Consider Letting Relief (if shared occupancy rules met): restricted and uncommon since April 2020. (GOV.UK)
Step 6 — Deduct Annual Exempt Amount and any capital losses. (GOV.UK)
Step 7 — Apply the rates: 18% within basic-rate band; 24% above. Blend if needed. (GOV.UK)
Step 8 — Report & pay: If a UK residential property gain is due, file and pay within 60 days of completion via HMRC’s property CGT service. (GOV.UK)
Want a calculation you can rely on? Get in touch with Naail & Co to book a free initial consultation.
A) Fully Let Buy-to-Let — No PRR
Bought: £300,000; costs £7,000
Sold: £420,000; selling costs £6,000
Gross gain: (420,000 − 6,000) − (300,000 + 7,000) = £107,000
PRR: none (never main residence)
AEA: £3,000 → Taxable gain £104,000
Rates: assume higher-rate taxpayer → 24% → CGT ≈ £24,960. (GOV.UK)
B) Lived Then Let (PRR + Final 9 Months)
Ownership: 84 months; lived 36 months; then let 48 months
Exempt months: 36 + 9 = 45 → Taxable months: 39
Gross gain: £120,000 → Chargeable portion: 120,000 × (39/84) = £55,714
AEA: £3,000 → £52,714 taxable; rate depends on your band(s). (GOV.UK)
(These are simplified illustrations. Actual outcomes vary with improvements, losses, income bands and completion dates.)
Missing the 60-day deadline on UK residential property gains. Penalties/interest mount quickly. (GOV.UK)
Misclassifying improvements as repairs (or vice-versa). Keep robust evidence. (SMH Group)
Incorrect time-apportionment — forgetting the final 9 months for former main residences. (GOV.UK)
Assuming Letting Relief still applies widely — it’s now very restricted (shared occupancy). (GOV.UK)
Using the wrong rates/allowance — rates shifted and the AEA is £3,000 for 2024/25. (GOV.UK)
Avoid expensive mistakes. Get in touch with Naail & Co to book a free initial consultation.
Pre-sale planning: structure ownership, time disposals, and use both spouses’ allowances.
Forensic cost review: evidence-based improvement schedules; enhancement vs repair.
Precise PRR apportionment: month-accurate calculations; assess shared-occupancy Letting Relief eligibility.
60-day reporting: end-to-end preparation, filing and payment support.
HMRC defence: we’ll stand behind our computation and help with any enquiry.
CTA: Get in touch with Naail & Co to book a free initial consultation — fast, friendly, expert property tax advice.
CGT rates & basic rules (GOV.UK): overview and current rates. (GOV.UK)
Annual Exempt Amount & allowances (GOV.UK): current AEA and historical figures. (GOV.UK)
Private Residence Relief (HS283): detailed helpsheet including final 9-month rule. (GOV.UK)
Report & pay CGT on UK residential property (60-day): how and when to file/pay. (GOV.UK)
Letting Relief (HMRC CG Manual): post-April-2020 restriction to shared occupancy. (GOV.UK)
ICAEW tax updates (context on recent rate changes): professional commentary. (ICAEW)
The CGT rules for investment property are detailed, and small choices — timings, ownership splits, documenting improvements — can swing your tax bill by thousands. If you’re selling or reorganising your portfolio, speak to us before you exchange contracts.
Get in touch with Naail & Co to book a free initial consultation — practical, compliant, and tailored advice for landlords and property investors.
Capital Gains Tax (CGT) on Investment Property is a tax you pay on the profit made when selling, gifting, or otherwise disposing of a buy-to-let, second home, or investment property that has increased in value. You pay CGT only on the gain, not the total sale price, after deducting purchase costs, improvement costs, and the annual exemption.
As of the 2025/26 tax year, the CGT rates for residential investment properties are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. The rate applies only to the chargeable gain after all reliefs and allowances.
You can’t avoid CGT entirely, but you can minimise it legally. Common strategies include:
Using both spouses’ annual exemptions
Claiming Private Residence Relief and Letting Relief (if applicable)
Timing disposals to fall into a lower tax year or band
Offsetting capital losses from other investments
Naail & Co can help you plan tax-efficiently before you sell your property.
Letting Relief can reduce CGT if you lived in the property while letting part of it. Since April 2020, it applies only to shared occupancy situations (where you and your tenant lived in the same home). The relief can be worth up to £40,000 per owner but is now much narrower in scope.
Transfers between spouses or civil partners are generally no-gain, no-loss transactions, meaning there is no CGT payable at that point. However, future sales will use the original base cost, so proper planning is important for tax efficiency.
Failing to report or pay CGT within the 60-day window can result in automatic HMRC penalties and daily interest charges. HMRC can also open a compliance check, so it’s best to seek help early. Naail & Co can handle the entire reporting process on your behalf.
To calculate CGT on an investment property, subtract the property’s purchase price, improvement costs, and selling expenses from the sale price. Apply any eligible reliefs (such as Private Residence Relief), deduct the annual exemption (£3,000 for 2024/25), and then apply the appropriate CGT rate — 18% or 24%, depending on your income band.
Yes, if you sell a buy-to-let property for more than you paid for it, you will likely owe Capital Gains Tax (CGT). You can reduce the gain with allowable costs, the annual exemption, and in some cases, Private Residence Relief if the property was once your main home.
Private Residence Relief reduces or eliminates CGT when the property was your main residence for part of your ownership. You also get a final 9 months exemption even if you moved out before selling. Time apportionment ensures only the non-qualifying months are taxed.
If you sell a UK residential investment property and CGT is due, you must report and pay it within 60 days of completion using HMRC’s online CGT on UK Property Account. Missing this deadline can lead to penalties and interest.
You can deduct capital improvements—like an extension, new roof, or loft conversion—from your gain, as they enhance the property’s value. However, repairs and maintenance (like painting or replacing windows) are not deductible for CGT purposes, though they may have been deductible against rental income when incurred.
Naail & Co specialise in Capital Gains Tax (CGT) on Investment Property and help landlords, investors, and second-home owners calculate, report, and minimise their tax. Our experts prepare accurate CGT computations, claim eligible reliefs, and ensure full HMRC compliance.
Get in touch with Naail & Co to book a free initial consultation.
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