Selling, Renting or Inheriting Property in the UK: A Full Guide to Capital Gains Tax Relief Strategies
- TBA
- Jul 9
- 3 min read
After a sharp drop in property transactions in March—caused by buyers rushing to complete before April’s stamp duty changes—the UK housing market rebounded in May. House prices rose again, with the annual growth rate climbing to 3.5% and the average property price reaching £273,427.
As the property market remains active, more homeowners are finding themselves liable for capital gains tax (CGT) when selling second homes, renting out property, or inheriting real estate.
In this guide, we’ll walk you through the structure of CGT, how it’s calculated, and practical strategies for managing it. Whether you're an investor or a homeowner, understanding your tax responsibilities is key.
What is capital gains tax and when is it payable?
Capital gains tax (CGT) is charged on the profit made when selling an asset that has increased in value. It applies when the selling price exceeds the original purchase price.
From 30 October 2024, the CGT rate for property will align with the rate for other assets:
Basic rate taxpayers: 18% (applies if the capital gain, combined with other income, remains within the basic tax band)
Higher and additional rate taxpayers: 24%
The annual CGT exemption for the 2025–26 tax year remains at £3,000. Couples holding property jointly may use a combined allowance of £6,000. Note that unused allowance cannot be carried forward to future years.
CGT is added to your total income for the year, meaning it can push you into a higher tax bracket—making advance planning essential.
CGT applies to UK property in the following cases:
Sale of a second home or buy-to-let property
Sale of inherited or gifted property, based on the increase in value
In certain circumstances, even sale of your main residence may trigger CGT
It’s worth noting that most main residences qualify for Private Residence Relief, which exempts them from CGT. This also includes an additional exemption for the final nine months of ownership. For individuals entering care homes or those with disabilities, the exemption period may be extended to 36 months.
Scope and exceptions of capital gains tax
Main residence and other exemptions
In general, the sale of your main residence is not subject to CGT. However, exceptions apply if:
The property exceeds 5,000 square metres in total land area
Part of the property is used for business purposes
A large portion is sublet
The property was purchased solely for resale at a profit
You may also be exempt from CGT under the following conditions:
Gifts to a spouse, civil partner, or a registered charity are usually exempt
If the property is classed as a business asset, you may qualify for relief
If the property is occupied by a dependent relative, an exemption may apply
Second homes and rental property
These properties are liable for CGT when gains exceed the annual exemption. Whether sold entirely or partially rented, it’s important to calculate the gain and allowable deductions accurately.
Example:
A taxpayer sells a second property during the 2025–26 tax year. The property was purchased for £120,000 and sold for £220,000, with £5,000 in legal and estate agent fees. The gain is £95,000. After deducting the £3,000 allowance, CGT is due on £92,000. If the seller’s annual income is £25,000, the gain may be subject to both 18% and 24% tax bands, resulting in approximately £20,563.80 in CGT.
Inherited and gifted property
Inherited properties are revalued at the date of death, and no CGT is due upon inheritance. However, CGT applies to any increase in value from the date of inheritance to the date of sale. For gifted property, if the donor retains some benefit or use of the property (a ‘gift with reservation’), the valuation date for CGT purposes may differ—resulting in a different tax outcome.
Special case: overseas property sales
UK tax residents are liable for CGT on overseas property sales, though double taxation agreements (DTAs) may help avoid being taxed twice. Rules are more complex if your permanent residence is outside the UK, so it's wise to seek expert advice.
Some advice from TB Accountants
If you're a non-resident landlord with UK property or a UK resident selling overseas real estate and you're unsure about the tax implications, contact our team.
With 16 years of experience, we offer free one-to-one consultations and can help you build a personalised tax strategy.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation.
