Capital Gains Tax on the Disposal of Property
You may have to pay capital gains tax on property if you make a profit (gain) when you sell or dispose of an asset. The most common way for a person to dispose of an asset is by selling it to another person. However, you may also be liable to pay capital gains if you gift or exchange an asset.
Capital gains tax on the disposal of an asset can be complicated to calculate as there are several tax reliefs and exemptions to consider. In case of a property sale, the applicable reliefs may be Principal Private Residence Relief (PPR), Letting Relief, Rollover Relief, and Gift Relief, etc., which can significantly reduce the capital gains tax payable or defer it to a future date. Therefore, you must correct your calculations to ensure maximum tax savings.
- Chartered Certified Accountants
- Fixed Fee Services
- Tax Liability Minimisation
Capital Gains Tax on Property
You may have to pay Capital Gains Tax on Property if you make a profit (gain) when you sell, gift, or dispose of a property. While the most common situation is selling a property to another person, HMRC also charges Capital Gains Tax on Property if it is gifted, exchanged, or transferred in another way.
Calculating Capital Gains Tax on Property can be complex, as several reliefs and exemptions may apply. These reliefs can significantly reduce the amount of Capital Gains Tax on Property due, or in some cases, defer the liability to a later date. Because of these complexities, it is important to carry out accurate calculations and apply the correct reliefs to ensure you do not overpay. Professional advice can help maximise your tax savings and ensure compliance with HMRC rules.
Selling Your Main Home and Capital Gains Tax on Property
If you are selling your main home, and you have always lived in it as your primary residence, you generally will not have to pay Capital Gains Tax on Property, provided certain conditions are met.
However, if the property was only your main residence for part of the ownership period, and was vacant or let during other periods, you may become liable for Capital Gains Tax on Property. In such cases, you can usually claim Principal Private Residence (PPR) Relief for the time you lived in the property. If the property was let for part of the ownership period, you may also qualify for Letting Relief, which can reduce your tax bill further.
HMRC applies specific rules when calculating Capital Gains Tax on Property, including:
- Periods of actual occupation
- Periods of deemed occupation (as defined by HMRC)
- Periods when the property was let
- Periods when the property was vacant
A detailed review of your circumstances is required to correctly apply Principal Private Residence Relief (PPR) and Letting Relief. In many cases, these reliefs can significantly reduce your liability for Capital Gains Tax on Property, and in some situations, eliminate it entirely.
Capital Gains Tax on the Sale of Buy to Let Property
If you sell a rental property and make a profit, you will usually need to pay Capital Gains Tax on Buy to Let. Unlike your main home, a buy to let property does not qualify for Private Residence Relief or Letting Relief, so the full gain is normally taxable.
The amount of Capital Gains Tax on Property you pay depends on your overall income in the tax year of sale. For residential property, the current rates are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.
Calculating Capital Gains Tax on Buy to Let can be complex, as you can deduct certain allowable costs (such as stamp duty, legal fees, and improvement costs) to reduce your gain. Getting the calculation right is essential to avoid overpaying and to stay compliant with HMRC rules.
Capital Gains Tax on the Sale of Property by Non-Residents
In the past, individuals who were not resident in the UK did not have to pay Capital Gains Tax on the disposal of UK property. However, the rules changed from 6 April 2015. Since then, non-residents have been chargeable to UK Capital Gains Tax on the sale or disposal of UK residential property under the Non-Resident Capital Gains Tax (NRCGT) rules.
This means that Capital Gains Tax on the Sale of Property by Non-Residents may apply when a UK residential property is sold, even if the individual lives abroad. The calculation can be complex, as only gains arising after 6 April 2015 are generally taxable, and special rules may apply to re-basing the property’s value at that date.
For more details on Capital Gains Tax on Property for Non-Residents, please [click here].
Rates of capital gains tax
There are different capital gains tax rates depending on whether you sell a residential property or other assets and also in which income band you fall. The following are the income tax bands in the UK, and the rate of capital gains tax would depend on which income band your capital gains would fall in.
Capital Gains Tax Rates 2025/26
Taxpayer Income
band
Band / Threshold
Gain on disposal of
Residential Property
Gain on disposal
of Other assets
Basic rate
£0 to £50,270
18%
10%
Higher rate
£50,271 to £150,000
28%
20%
Additional rate
Over £150,000
28%
20%
How to Calculate Capital Gains Tax on Property
Capital Gains Tax on property is levied on the profit you make when you sell or otherwise dispose of a property that has increased in value. The calculation of this gain is not as straightforward as simply subtracting the original purchase price from the final sale price. Instead, it is a detailed process that involves identifying and deducting all “allowable expenses” from the proceeds of the sale. This ensures that the tax is applied only to the true net gain, rather than the gross profit.
When calculating your Capital Gains Tax on a property, you can deduct a number of specific costs from your total proceeds to reduce your taxable gain. These include expenses related to the acquisition and disposal of the property, as well as capital improvements made during your ownership.
When calculating Capital Gains Tax on Property, you can typically deduct:
- Acquisition costs: such as stamp duty, legal fees, and surveyor fees incurred when buying the property.
- Disposal costs: including estate agent fees, solicitor fees, and other expenses related to selling the property.
- Capital improvements: costs of significant enhancements like extensions, structural work, or major renovations that increase the property’s value, but not routine maintenance or repairs.
Here’s a simplified calculation format:
Proceeds from sale of property
XX
Less: Purchase price of the property
(XX)
Less: Acquisition costs (stamp duty, legal fees etc.)
(XX)
Less: Disposal costs (estate agent, solicitor fees etc.)
(XX)
Less: Capital expenditure (improvements)
(XX)
Gain on disposal of property
XX
Less: Applicable tax reliefs – e.g.:
Principal Private Residence (PPR) Relief
(XX)
Letting Relief
(XX)
Taxable Gain
XX
Why Choose Zahtax Accountants for Your Capital Gains Tax on Property?
When it comes to dealing with Capital Gains Tax on Property, having the right tax advisor can make a huge difference. At Zahtax Accountants, we specialise in helping landlords, homeowners, and investors manage their property tax efficiently and in full compliance with HMRC rules.
Here’s why clients trust us:
- Specialist Expertise – We have in-depth knowledge of Capital Gains Tax on Property, including reliefs such as Principal Private Residence Relief (PPR), Letting Relief, and other exemptions that can reduce or even eliminate your tax bill.
- Maximise Tax Savings – Our team ensures that all allowable costs, improvements, and reliefs are correctly applied so you don’t pay more tax than necessary.
- HMRC Compliance – We handle all reporting requirements, including 30-day CGT returns, keeping you compliant and avoiding penalties.
- Tailored Advice – Every property and client situation is different. We provide clear, practical advice suited to your circumstances.
- Stress-Free Process – From calculating your liability to submitting your return, we manage the entire process so you can focus on your property goals.
How Zahtax Can Help You with Your Capital Gains Tax on Property
Dealing with Capital Gains Tax on Property can be complex, especially with changing HMRC rules, strict reporting deadlines, and various reliefs available. At Zahtax Accountants, we make the process simple and stress-free by handling everything on your behalf.
Here’s how we can help:
- Expert Calculations – We accurately calculate your property gain, taking into account purchase costs, sale costs, improvements, and allowable expenses.
- Maximising Reliefs – We assess your eligibility for Principal Private Residence (PPR) Relief, Letting Relief, and other exemptions to reduce or even eliminate your tax liability.
- 30-Day Reporting – We ensure your Capital Gains Tax on Property is reported to HMRC within the strict 30-day deadline to avoid penalties and interest.
- Tailored Advice – Every client’s situation is unique. Whether it’s your main home, a buy-to-let, or an inherited property, we provide clear, personalised tax advice.
- Complete HMRC Handling – We act as your tax agent, dealing with HMRC directly so you don’t have to.
Frequently Asked Questions
Get answers to common questions about sole trader tax requirements and our services.
What is Capital Gains Tax on property, and what counts as a 'disposal'?
Capital Gains Tax on property is a tax on the profit you make when you sell or “dispose of” a property that has increased in value. A “disposal” is a broad term in this context and includes not only selling the property but also gifting it, exchanging it, or transferring it for less than its market value. The tax is calculated on the “chargeable gain,” which is the sale price minus the original cost and other allowable expenses.
Is my main residence exempt from Capital Gains Tax on property?
Your main home is generally exempt from CGT due to a relief known as Principal Private Residence (PPR) Relief. However, this relief may be restricted if the property has been used for business purposes, rented out for a period, or if the garden or grounds exceed a certain size. If you have more than one property, you must formally nominate one as your main residence.
What costs can I deduct to reduce my Capital Gains Tax on property bill?
You can significantly reduce your taxable gain by deducting “allowable expenses.” These include costs associated with the acquisition of the property, such as stamp duty and legal fees, as well as costs of disposal, like estate agent and solicitor fees. Importantly, you can also deduct the cost of capital improvements that add value to the property, such as building an extension or a loft conversion. Routine maintenance and repairs, however, are not deductible.
Do I have to pay Capital Gains Tax if I gift a property?
Yes, a gift is considered a disposal for CGT purposes. Even though you don’t receive any money, you are treated as having sold the property at its market value. This can create a significant tax liability for the person gifting the property. There are special reliefs and rules for transfers between spouses or civil partners and for certain business-related gifts.
What reliefs are available for property CGT?
Your main home may be exempt under Private Residence Relief. Other exemptions include small gains or transfers between spouses. A capital gains on property specialist can help identify if you qualify.
Can I deduct costs from my capital gains?
Yes. You can deduct acquisition costs (e.g., stamp duty, legal fees), selling costs (e.g., estate agent fees), and costs of capital improvements (e.g., extensions or renovations).
How can a specialist help with Capital Gains Tax on property?
A capital gains tax on property specialist can guide you through calculations, claim all available reliefs, and ensure HMRC compliance, helping minimise your tax liability and avoid errors in reporting.