Capital gains tax on second homes: the 2026 guide

Sell a second home, whether it's a buy-to-let, a holiday cottage, an inherited property or somewhere you once lived and now let out, and you'll almost always trigger capital gains tax (CGT). The rules have shifted quite a bit over the last few years. Here's where things stand for 2025/26 and what to sort out before you complete the sale.

The headline rates and allowances

• Annual exempt amount: £3,000, down from £12,300 a few years ago.
• Residential property CGT rates (2025/26): 18% for any part of the gain falling in your basic-rate band, 24% for any part falling in higher- or additional-rate bands.
• Other gains: 18% / 24% (now aligned with residential).

The 60-day CGT property return

If you're a UK resident selling a residential property and there's CGT to pay, you must file a 60-day CGT return and pay the estimated tax within 60 days of completion. That's separate from your normal self-assessment return, though the gain still has to appear there too at the year end. Miss the 60-day window and HMRC starts charging late-filing penalties straight away.

How the gain is calculated

The taxable gain is broadly:

Sale proceeds
 less Original cost (or 5 April 1982 value if you owned it before then)
 less Stamp duty paid on purchase
 less Legal and agent fees on purchase and sale
 less Capital improvements (extensions, new kitchen, replacement roof — not repairs)
 = Gross gain
 less Private residence relief (if you ever lived there as your only/main home)
 less Annual exempt amount (£3,000)
 = Taxable gain

Private residence relief, the big one

If the property has ever been your only or main residence, you can claim Private Residence Relief (PRR) for the time you actually lived there plus the final 9 months of ownership. PRR is often the single largest deduction in a CGT calculation, particularly for properties you lived in yourself before letting them out.

Lettings relief, much narrower than it used to be

These days lettings relief only applies where you shared the property as your main home with the tenant. The old "let to a stranger" version went in 2020. Plenty of sellers haven't caught up with that and end up overestimating their relief.

Worked example

Say you bought a flat in 2010 for £180,000, lived in it for three years, then let it out for nine years before selling in 2025 for £330,000. SDLT and fees on purchase came to £3,000. Selling costs were £6,000. No improvements.

• Gross gain = £330,000 − £180,000 − £3,000 − £6,000 = £141,000
• Total ownership: 12 years. PRR period: 3 years living there + 9 months final = 3.75 years.
• PRR proportion: 3.75 / 12 = 31.25%. PRR = £141,000 × 31.25% = £44,063.
• Gain after PRR: £96,937.
• Less annual exempt amount £3,000 = £93,937 taxable.
• At higher-rate (24%) ≈ £22,545 CGT due within 60 days of completion.

Five things to do before you sell

1. Gather your purchase paperwork. Original completion statement, SDLT receipt, and any improvement invoices.
2. List capital improvements properly. Decorating doesn't count, but a new kitchen, an extension or a replacement roof does.
3. Use both spouses' allowances and bands. Transferring a share before sale, as a no-gain/no-loss transfer between spouses, can double your annual exempt amount and use both basic-rate bands.
4. Time the sale across tax years where you can. A completion in early April can double your annual exemption by spreading it over two years.
5. Get your CGT calculation in writing before you complete, not afterwards. The 60-day clock starts on completion day.

If you're selling a second home in 2025/26, the difference between getting CGT right and getting it wrong usually runs into thousands of pounds. Book a free 30-minute consultation and we'll walk you through your own numbers and the 60-day return. See also our pages on property tax and personal tax.