Capital Gains Tax When Selling a Second Home

Capital Gains Tax is one of the most significant costs you can face when selling a property that is not your main home. Whether you own a buy-to-let, a holiday cottage, or a flat you once lived in, the tax can run to tens of thousands of pounds on a property that has risen substantially in value.

This guide explains how CGT works when you sell a second property in England and Wales, the current rates and allowances, which costs you can deduct, and exactly how to report and pay the tax to HMRC. For a broader view of all the costs involved in a property sale, see our guide to the hidden costs of selling a house.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make when you sell (or "dispose of") an asset that has increased in value. For property, the gain is broadly the difference between what you paid for it and what you sold it for, minus certain allowable deductions. CGT is governed by the Taxation of Chargeable Gains Act 1992, with rates and allowances updated annually by the Chancellor.

Your main home is normally exempt from CGT under Private Residence Relief (PRR). However, a second home — whether it is a buy-to-let, a holiday let, or simply a property you own but do not live in — does not qualify for PRR, and any gain on its sale is taxable.

Current CGT rates on residential property (2025-26)

CGT rates on residential property are higher than those on other assets such as shares or business assets. Following the changes announced in the Autumn Budget 2024, the rates for the 2025-26 tax year are:

Your tax band is determined by adding the taxable gain to your income for the year. This means a basic rate taxpayer could end up paying the higher rate if the gain is large enough to push their total income above £50,270. You can check the latest thresholds on the GOV.UK Capital Gains Tax rates page.

The annual CGT exemption

Every individual in the UK has an annual tax-free CGT allowance called the Annual Exempt Amount. For the 2025-26 tax year, this is £3,000 per person. If your total capital gains for the year fall below this threshold, no CGT is due.

The allowance has been reduced substantially in recent years. It was £12,300 until April 2023, then cut to £6,000 for 2023-24, and again to £3,000 from April 2024. According to HMRC's published allowances, this means sellers of second homes now keep less of their gain tax-free than at any point in the last decade.

If the property is jointly owned — for example, with a spouse or civil partner — each owner has their own £3,000 exemption, potentially sheltering £6,000 of the combined gain from CGT.

How to calculate your capital gain

The basic formula for calculating a capital gain on a property sale is straightforward:

Capital gain = Sale price - Purchase price - Allowable costs - Annual exemption

Understanding which costs you can deduct is critical to reducing your tax bill. Some of these are costs you will encounter during the sale process itself — for a full breakdown, see our guide to conveyancing costs.

Allowable deductions

HMRC allows you to deduct the following costs from the sale price before calculating your taxable gain:

• Original purchase price — what you paid for the property
• Stamp duty — the SDLT you paid when you bought the property (including any higher rate surcharge)
• Solicitor and conveyancer fees — legal costs on both the purchase and the sale. See our guide to solicitor fees when selling for typical costs
• Estate agent fees — commission and VAT paid on the sale
• Improvement costs — capital expenditure that adds value to the property, such as an extension, loft conversion, new bathroom, or new kitchen
• Survey and valuation fees — costs of any survey you commissioned when purchasing

Costs you cannot deduct

Not every property-related expense qualifies. HMRC specifically excludes the following:

• Routine maintenance and repairs — fixing a boiler, redecorating, or replacing like-for-like items
• Mortgage interest payments — these relate to financing, not the asset itself
• Insurance premiums — buildings or contents insurance costs
• Utility bills and council tax — running costs of the property

The distinction between improvements and repairs is important. Replacing a basic bathroom with a basic bathroom of similar standard is a repair. Installing a new bathroom where there was not one before, or significantly upgrading the specification, is an improvement. HMRC guidance on working out your gain provides further detail on what qualifies.

Worked example: CGT on a second home

The following example shows how CGT is calculated for a higher rate taxpayer selling a buy-to-let flat they have owned for 10 years. It assumes single ownership and no period of occupation as a main residence.

In this example, the seller would owe £27,950.40 in CGT. This must be reported and paid within 60 days of completion. If the property were jointly owned with a spouse, each owner could claim their own £3,000 exemption against their share of the gain, reducing the combined tax bill.

Private Residence Relief and second homes

Private Residence Relief (PRR) is the exemption that prevents you from paying CGT on your main home. Under section 222 of the Taxation of Chargeable Gains Act 1992, a property qualifies for PRR if it has been your only or main residence throughout your period of ownership.

A second home does not normally qualify. However, there are some circumstances in which partial relief may be available:

• Periods of occupation: If you lived in the property as your main home for part of your ownership, you can claim PRR for those periods. The gain is apportioned on a time basis.
• Final period exemption: If you have any qualifying period of main residence occupation, the final nine months of ownership are automatically exempt, even if you were not living there. This was reduced from 18 months in April 2020.
• Nomination election: If you own two properties and live in both, you can nominate which one should be treated as your main residence for CGT purposes. You must make this election within two years of acquiring the second property by writing to HMRC.
• Lettings Relief: Prior to April 2020, Lettings Relief could shelter up to £40,000 of gains on a property that had been both your home and let out. Since April 2020, it only applies where you are in shared occupation with a tenant, making it largely irrelevant for most second-home sellers.

Reporting and paying CGT to HMRC

Since April 2020, UK residents who sell a residential property at a gain must report and pay CGT within 60 days of the completion date. This is done through HMRC's 'Report and pay Capital Gains Tax on UK property' service, which is separate from the Self Assessment system.

What you need to report

• The completion date of the sale
• The sale price
• The original purchase price and date
• Details of all allowable costs and deductions
• Any relief you are claiming (e.g. partial PRR)
• Your estimate of income for the tax year (to determine your rate)

Penalties for late reporting

If you miss the 60-day deadline, HMRC may charge a £100 late filing penalty. If the return is more than six months late, additional penalties apply. Interest is charged on any unpaid CGT from the date it was due. Even if you file a Self Assessment return, the 60-day property return is a separate requirement and missing it will attract penalties regardless.

If you are also registered for Self Assessment, you must still include the property gain on your annual tax return for the year of sale. Any CGT already paid through the 60-day return is credited against your Self Assessment liability.

Strategies to reduce your CGT bill

While you cannot avoid CGT on a second property entirely, there are legitimate ways to reduce the amount you owe. You should seek professional tax advice before completing any sale where CGT is likely to be significant.

1. Claim every allowable deduction. Keep records of all costs associated with buying, improving, and selling the property. Improvement receipts from years ago can make a meaningful difference to your tax bill. Even relatively small deductions add up — see our guide on solicitor fees for the kind of legal costs that qualify.
2. Use both annual exemptions. If you own the property jointly with a spouse or civil partner, each of you can apply your £3,000 annual exemption against your share of the gain. If the property is not already jointly held, you can transfer a share to your spouse CGT-free before the sale to take advantage of both exemptions.
3. Offset capital losses. If you have made a capital loss on another asset — such as shares or another property — in the same tax year, you can offset it against your property gain. Losses from previous years that have been reported to HMRC can also be carried forward.
4. Time the sale across tax years. If you are close to the end of a tax year (5 April), exchanging contracts in one year and completing in the next is not an option because CGT is triggered at completion. However, if you have two properties to sell, spreading the sales across different tax years allows you to use two years' worth of annual exemptions.
5. Consider pension contributions. Making pension contributions in the same tax year as the property sale can reduce your income, potentially keeping you in the basic rate band and lowering your CGT rate from 24% to 18%.

Stamp duty interactions when selling and buying

If you are selling a second home and buying a new property at the same time, there may be stamp duty implications to consider. Buyers who already own a residential property pay a higher rate of Stamp Duty Land Tax (an additional 5% surcharge on top of standard rates). If you are selling your second home and buying a replacement main residence, the timing of the transactions matters.

For a detailed explanation of how stamp duty works when selling and buying simultaneously, see our guide on stamp duty when selling and buying at the same time. Getting the order and timing right can save you thousands in surcharge costs.

Record keeping for CGT purposes

Good record keeping is essential when you own a second property. HMRC requires you to keep records for at least four years after the end of the tax year in which you filed your CGT return. In practice, you should keep records for the entire period of ownership, as you will need them to calculate the gain when you eventually sell.

Key documents to retain include:

• Completion statement from the original purchase
• Solicitor invoices for the purchase and sale
• Stamp duty payment confirmation (usually shown on the SDLT return)
• Receipts and invoices for improvement works (not repairs)
• Estate agent fee invoice
• Any letting agent or property management records
• The completion statement from the sale

How Pine helps sellers prepare

Selling a second property involves the same conveyancing process as selling any home — drafting contracts, completing property information forms, responding to buyer enquiries, and managing exchange and completion. Pine helps sellers prepare their legal paperwork before finding a buyer, including completing TA6 and TA10 forms with AI guidance and ordering property searches at near-trade prices. Getting this preparation done early means your solicitor can focus on the transaction itself, and you can focus on getting your CGT reporting right. For a full overview of the costs involved in the legal side of selling, see our conveyancing costs breakdown.

Sources and further reading

• Capital Gains Tax — Overview (GOV.UK)
• Capital Gains Tax Rates (GOV.UK)
• Capital Gains Tax Allowances (GOV.UK)
• Report and Pay Capital Gains Tax on UK Property (GOV.UK)
• Tax When You Sell Your Home (GOV.UK)
• Taxation of Chargeable Gains Act 1992 (legislation.gov.uk)
• TCGA 1992, Section 222 — Relief on Disposal of Private Residence (legislation.gov.uk)
• Autumn Budget 2024 (GOV.UK)

Related guides

• Executor Tax Obligations When Selling Property: UK Guide
• Capital Gains Tax on Inherited Property: How to Reduce Your Bill
• Selling Your UK Home to Move Abroad
• Selling Your House After Retirement

Frequently asked questions