UK Capital Gains Tax on Property 2025: Rates, Exemptions and How to Reduce Your Bill

Capital gains tax on property is one of the most misunderstood areas of UK personal tax. People assume that selling the family home means a large tax bill, when usually it does not. Others sell a buy-to-let without realising they needed to report and pay within 60 days of completion, and end up with a late filing penalty on top of the tax owed.

This guide covers the rates, exemptions and reporting rules that apply in 2025, with a particular focus on the situations people commonly get wrong.

CGT rates on residential property in 2025

The capital gains tax rates on residential property changed in October 2024 in the Autumn Budget. The rates now are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. These apply to gains on UK residential property, which means houses and flats, whether or not you live in them.

The annual exempt amount is the first £3,000 of gain in each tax year that is completely free of CGT. This has been cut significantly from £12,300 in 2022/23 to the current £3,000, which means more gains are now taxable than they were a few years ago.

Whether you are a basic or higher rate taxpayer for CGT purposes depends on adding your taxable gain to your total income for the year. If that combined figure takes you above the basic rate band of £50,270, the portion above that band is taxed at the higher rate even if your regular income alone sits in the basic rate band.

Private residence relief: your main home is usually exempt

Private residence relief, also called main residence relief, means that gains on your principal private residence are generally exempt from CGT. If you bought a house, lived in it throughout your ownership, and sold it, you will not normally pay any CGT regardless of the profit you made.

The relief applies automatically to the period you lived in the property as your main home. There is also a final period exemption of nine months, which means the last nine months of ownership always qualify for relief even if you were not living there. This matters if you bought a new home before selling your old one and had a period of overlap.

Where it gets more complicated is when you have been absent from the property. Not all absences break the relief. Periods of up to four years working elsewhere in the UK, and absences due to working abroad, can qualify for relief as deemed periods of occupation provided you return to live in the property afterward. But these conditions are specific and need to be checked carefully against your actual circumstances.

Buy-to-let properties and second homes

If you sell a property that was never your main home, or was only your main home for part of the time, the position is quite different. You will generally owe CGT on the gain that does not qualify for private residence relief.

The gain is calculated as the sale price minus the purchase price minus allowable costs. Allowable costs include stamp duty you paid when buying, legal fees on purchase and sale, estate agent fees on sale, and the cost of improvements that are still reflected in the property at the point of sale. Day-to-day repairs and maintenance do not count as improvement costs for CGT purposes.

If you have owned a buy-to-let for many years, the gain can be substantial even after deducting costs. A property bought for £150,000 in 2010 and sold for £380,000 in 2025 has a raw gain of £230,000. After the £3,000 annual exempt amount, the taxable gain is £227,000. A higher rate taxpayer would owe £54,480 in CGT. That is a material sum that needs to be planned for well in advance of sale.

The 60-day reporting rule

Since April 2020, if you sell a UK residential property and you have CGT to pay, you must report it to HMRC and pay the tax within 60 days of completion. This applies even if you have not yet filed your annual self-assessment return. Failure to report and pay on time results in automatic interest charges and potential penalties.

The reporting is done through HMRC's online CGT on UK property service, which is separate from your self-assessment return. If you file self-assessment, you still need to include the gain in your annual return as well, but the 60-day payment is a standalone obligation. Many people who have not previously needed to do self-assessment find this confusing and miss the deadline.

The 60-day rule applies specifically to UK residential property. Gains on non-residential property, shares, or other assets still go on your annual self-assessment return and are paid by 31 January the following year.

Transferring property to a spouse or civil partner

Transfers of property between spouses or civil partners who live together are made at no gain, no loss. This means you can transfer a property to your spouse without triggering a CGT event. The receiving spouse takes it over at your original cost, so the gain is deferred rather than eliminated, but it means you can potentially use both spouses' annual exempt amounts when the property is eventually sold, or arrange the ownership in whichever way minimises the combined tax bill.

This transfer at nil gain does not apply to cohabiting partners who are not married or in a civil partnership. If you and your partner own a property jointly and you transfer your share to them without being married, that is a disposal for CGT purposes at the market value of your share.

Letting relief and when it no longer applies

Letting relief used to be a significant relief for people who rented out their former main home. Since April 2020 the rules changed substantially. Letting relief now only applies where the owner was in shared occupancy with the tenant, meaning you were still living in the property while renting part of it out. The old regime, where you got up to £40,000 of letting relief just for having rented the property at some point while it was also your main home, no longer applies.

If you lived in your property, then rented it out and moved elsewhere, and are now selling, letting relief will not reduce your bill under the current rules. Private residence relief will cover the time you lived there, and the final nine months, but the intervening rental period is fully taxable without the additional letting relief buffer that existed before 2020.

Reducing your CGT liability legally

There are several legitimate approaches to managing a property CGT liability. Timing the sale to straddle two tax years allows you to use the annual exempt amount in two years rather than one. Transferring ownership to a spouse before sale to use their allowance and potentially their lower tax rate is another common approach. Making sure all allowable costs are properly documented and included in your calculation is basic but frequently done incompletely.

If you have capital losses from other investments, including other property, you can offset them against property gains in the same year. Unused capital losses can be carried forward to future years indefinitely.

Some landlords consider incorporating their property portfolio into a limited company, which then pays corporation tax on gains rather than CGT. This is a complex area with significant one-off costs and ongoing administrative requirements. It tends to make sense primarily for larger portfolios with long investment horizons and should be assessed by a specialist tax adviser who can model the numbers for your specific situation.