Understanding Capital Gains Tax (CGT) on Property Disposals: What You Need to Know
Chrissy Leach • 23 June 2025
When it comes to selling property in the UK, Capital Gains Tax (CGT) can be a significant consideration. Whether you're disposing of a second home, buy-to-let property, or an inherited asset, it's essential to understand your tax obligations and how to plan effectively. At CJL Accountancy, we’ve put together this simple guide to help you navigate CGT on property disposals.
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit (gain) you make when you sell or dispose of an asset that has increased in value. It’s the gain that’s taxed, not the total amount you receive.
For example:
You bought a property for £200,000.
You later sell it for £300,000.
Your gain is £100,000 (less any allowable costs).
CGT applies to individuals, partnerships, and trustees. Companies pay Corporation Tax on chargeable gains instead.
When Does CGT Apply to Property?
You may need to pay CGT when you dispose of:
- A second home or holiday home.
- A rental or buy-to-let property.
- A property you’ve inherited and then sold (if it's not your main residence).
- Land.
In most cases, you won’t pay CGT on your main home due to Private Residence Relief - but there are exceptions, especially if you've let the property out, used part of it for business, or if it’s grounds are very large.
How is CGT Calculated on Property?
Calculate your gain:
Sale proceeds
– Purchase price
– Allowable costs (e.g. legal fees, stamp duty, estate agent fees, certain improvement costs)
= Chargeable gain
Apply your CGT allowance:
For 2025/26, the annual CGT allowance (Annual Exempt Amount) is £3,000 for individuals. Companies don't get an allowance and it's a different rate for Trustees.
Apply the correct tax rate:
The tax rate you pay depends on your other income in the year. The rates for 2025/26 are 18% in the basic rate band and 24% in the higher rate band.
Example Calculation
Sale price: £350,000
Purchase price: £250,000
Allowable costs: £10,000
Gain: £90,000
Less annual allowance (£3,000): £87,000
If you're a higher rate taxpayer:
CGT due: £87,000 × 24% = £20,880
Reporting and Payment Deadlines
For UK residential property disposals, you need to submit a CGT return to HMRC and pay any CGT due within 60 days of completion. There may be exemptions to this reporting and payment deadline for UK tax residents but non-residents will always need to comply, regardless of whether there is any tax payable or not.
For overseas properties, you will need to submit and pay via your usual annual self-assessment tax return.
Failure to report on time can result in penalties and interest charges.
Reducing Your CGT Liability
There may be ways to minimise your CGT bill, including:
- Private Residence Relief (if applicable)
- Lettings Relief (limited and specific)
- Spousal transfers to utilise both allowances
- Timing disposals to maximise allowances and lower rates
- Claiming all allowable costs and deductions
Professional advice is highly recommended, especially as property disposals can involve complex rules.
How CJL Accountancy Can Help
At CJL Accountancy, we specialise in helping property owners, landlords, and investors navigate the complexities of Capital Gains Tax. Whether you're planning a sale, need help with reporting, or want to explore tax-saving opportunities, our expert team is here to support you.
📞 Contact us today to book a free consultation and ensure your property sale is as tax-efficient as possible.
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