Capital gains tax on second homes - what you need to know

If you are selling a residential property in the UK, which is not classified as your only or main residence, you may need to pay capital gains tax on any profit you make and report that capital gain to HMRC.  

Keeping up to date with the rules and available reliefs will allows you to plan your tax affairs in the most efficient way possible and avoid any nasty surprises.  

What is capital gains tax? 

Capital gains tax (CGT) is a tax on gains you make when you sell or gift a chargeable asset for a profit.  

When you sell an asset, the starting point for calculating the CGT you need to pay is calculated as the difference between the sale proceeds the original purchase price, however, guidance on calculating this can be found later in this article or on HMRC's website. 

The rate of CGT will depend on the type of asset that has been sold or gifted, and the date you dispose of it. 

Between 6th April 2024 and 29th October 2024, specific residential property rates of CGT applied. 

From 30th October 2024, residential property reverted to being taxed at the standard CGT rates. 

Certain CGT reliefs can be claimed which can be particularly useful for business sales. For a general HMRC overview click here, and useful information can be found in our guide to capital gains tax for businesses.  

When does relief from CGT apply to property sales? 

When selling residential property, you will need to consider whether a potential gain arising can be relieved by Private Residence Relief (PRR). PRR is a CGT relief that exempts all or part of a gain arising on the sale of your ‘only or main residence’.  

To get full relief, the property must be used as your only or main residence throughout ownership.  

If a property has not been used as your main residence throughout your ownership, PRR is time- apportioned to allow relief for periods of actual and deemed occupation.  .  

Actual occupation is the time when you use and live in the property as your main home. There is no minimum time period for actual occupation, but a test would be whether a reasonable onlooker would assess this to be your main home.  

Deemed occupation is where you are physically absent from the property, but you are treated as living there, because you meet the necessary qualifying deeming period conditions.  

Provided the qualifying deemed periods are preceded and followed by actual occupation, PRR can be claimed. The following deeming periods are available:  

• Where an individual works abroad for employment, that period abroad will qualify for relief regardless of the period of time. 
• Individuals that are employed or self-employed required to work elsewhere in the UK will be able to claim up to a maximum of four years for deemed occupation. 
• Any ‘allowed period of absence’ from the property, regardless of the reason, will be able to claim relief for a maximum of three years.  

More guidance on these conditions can be found on the HMRC website.  

The last nine months of ownership always qualify for PRR, provided the property has been your main home at some point during ownership. Where a disabled person or a long-term resident in a care home sells their main home, this period is extended to 36 months. HMRC guidance on the final periods of exemption can be found here.  

These PRR conditions apply to properties with garden and grounds within ½ hectare; caution will be needed on PRR claims on property with grounds exceeding this size. HMRC will permit claims for PRR with grounds exceeding this size provided the area is required for the ‘reasonable enjoyment’ of the property. Claims therefore need to be made on a case-by-case basis. 

Be aware that for spouses and civil partners living together, they may only have one qualifying main residence at any given time. Spouses and civil partners who own more than one home should confirm to HMRC which of their properties is their main home. This nomination must be made in writing within two years from the date you have a new combination of residences.  

Without an election, HMRC will be in the position of determining which property is your main residence based on several factors, for example:  

• Where your family lives  
• Where you work  
• Where you are registered to vote 
• Your correspondence address, e.g. with HMRC, doctors and banks
• The registered address for your car  
• Where your belongings are kept  
• The address which you use as your main address for council tax purposes 

This is not an exhaustive list but means that PRR is not available on buy-to-let properties or business premises such as furnished holiday lets, land and inherited property not used as your main home.  

For individuals who live abroad separate rules will need to be considered and specialist advice should be sought.  

Where you only receive partial PRR relief, you may be entitled to a further CGT relief which is known as ‘lettings relief’. This further relief is available if you sell a home which:

• at some point qualified as your main residence and
• part of the home has been rented out as a residential let at the same time, while 
• you also occupied the property. 

How much is CGT on a second (or additional) property? 

Once you have calculated your chargeable gain, you should deduct any capital losses from the current tax year. The gain can be further reduced by any capital losses brought forward from previous tax years but only as far as to ensure utilisation of your CGT annual exempt amount.  

The CGT annual exempt amount is currently £3,000 (2026/27) for individuals. 

CGT rates apply as follows: 

• 18% for basic rate taxpayers, and  
• 24% for higher and additional rate taxpayers

Do I have to report capital gains on residential property? 

If you are a UK tax resident, a ‘60 day’ CGT return will need to be submitted. The CGT return is separate from the CGT pages on the self-assessment tax return, so two submissions maybe required for the year.  

For non-UK residents selling UK residential property, CGT returns must be submitted within 60 days of completion regardless of whether a liability is payable.  

For disposals of UK residential properties by non-UK residents who owned the residential property before 6th April 2015, the standard approach for calculating the gain is to use the market value as of 5th April 2015 instead of using the actual cost of buying the property. This is because the rules which brought non-residents into the CGT regime for UK property sales came into effect in 2015. 

Non-UK residents are subject to UK CGT on direct or indirect disposals of all types of UK land and property as well as interests in ‘UK property rich entities’ from 6th April 2019. These reporting and calculation rules can be extremely complicated, so professional advice should be sought.

Are there any exemptions to CGT on a second home? 

There are some instances where a property disposal may not incur a CGT liability. 

If you transfer an interest in a property to your spouse or civil partner (who you are not separated from) this will not create a CGT liability. Spousal transactions take place on a ‘no gain no loss basis’.  

Special rules also apply in instances where a spouse or civil partners are separating. HMRC guidance in this scenario can be found here.  

In rare circumstances, dependent relative relief can apply on the sale of a property where specific conditions apply. The dependent relative must have occupied the property at some point between 1st April 1982 and 5th April 1988. In addition, there are various complexities to consider before a claim can be made and professional advice is a must.  

Speak to your accountant before a property sale to find out whether any CGT reliefs could apply. 

	£	£
Gross sale proceeds	X
Less costs of sale (note 1)	(X)
Net sale proceeds		X
Less: original purchase price or market value at 31/03/1982	(X)
Less: costs of purchase (Note 2)	(X)
Less: costs of enhancing the property (Note 3)	(X)
		X
Net gain / loss	X /	X
Less: Private Residence Relief (Note 4)	(X)
Chargeable gain / loss	X
Less: Current year and/or previous year capital losses (Note 5)	(X)
Less: Current year CGT Annual Exempt Amount (Note 6)	(X)
Taxable gain	X

What can I deduct from the CGT bill?  

To calculate your chargeable gain/loss on the sale of the property, you will need to use the following pro forma:

Note 1: These include costs directly relating to the sale of the property, such as solicitor fees and estate agent fees. HMRC guidance regarding other expenditure that can be deducted can be found here.  

Note 2: These include costs directly relating to the purchase of the property, such as solicitor fees, estate agent fees and stamp duty land tax. 

Note 3: HMRC guidance regarding the necessary criteria on enhancement expenditure can be found here.  

Note 4: PRR will potentially be available on the sale of a residential property which at some point has been used as your ‘only or main residence’.  

Note 5: Any current year capital losses will be automatically deducted against any gains from the same tax year. Any capital losses from a previous tax year can be deducted next. HMRC guidance on capital losses can be found here.  

Note 6: The CGT annual exempt amount is currently £3,000 (2026/27). HMRC guidance on the appropriate rates can be found here.  

If a taxable gain has arisen, a CGT liability can be calculated using the applicable rates.

For sales of assets which have suffered overseas tax, specialist advice should be sought to consider whether double tax relief can be utilised. A list of the double tax treaties for the UK can be found here.  

Are there any other second home taxes? 

Alongside CGT, property owners need to be aware of the other taxes that may arise during ownership:  

Stamp Taxes – when property is purchased stamp tax will be assessable. This will be payable 14 days after the ‘effective’ transaction date. The location of your purchased property will alter the tax that is payable:

• SDLT applies to England and Northern Ireland  
• Land and Buildings Transaction Tax applies to Scotland  
• Land Transaction Tax applies to Wales  

Council tax – property owners will need to be aware of any council tax liability that may be payable. Guidance on your council tax band can be found here.   

Income tax and National Insurance Contributions (NICs) – if you or your business lets out land or property, you will need to consider whether income tax and/or NICs applies to your rental income for a relevant tax year and reported via self-assessment, or for certain landlords from 6th April 2026, Making Tax Digital for income tax. For further guidance, click here to see our article on ‘How much is tax on rental income?’ 

Inheritance tax (IHT) – if you gift an interest in a property during your lifetime or if you own property on death, IHT needs to be considered. 

How TaxAssist Accountants can help

At TaxAssist Accountants, we have years of experience dealing with property owners, helping individuals and businesses stay up to date with the necessary CGT compliance and advice. Call us on 01480 592 002 or contact our team today to find out more about the tax advice and support we offer.

Last updated 13 May 2026 | First published 12 Jun 2023

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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