Capital gains tax on property
What the taxman takes when you sell a second home or a rental, and how your income decides the rate.
- Gain after costs
- £0
- Annual exempt amount
- £0
- Taxed at 18%
- £0
- Taxed at 24%
- £0
- Capital gains tax
- £0
The gain, not the sale price
Tax is charged on what the property gained, not what it sold for. Take the sale price, subtract what you paid, then subtract the costs of buying and selling and any capital improvements. Stamp duty, legal fees, survey fees and agent commission all count. An extension or a new kitchen counts. Repairs, redecorating and mortgage interest do not, which is the distinction people most often get wrong.
The first £3,000 of gains each year is exempt. It used to be several times larger, so figures you remember from a few years ago will understate the bill badly.
Your income decides the rate
The gain is stacked on top of your income for the year. Whatever is left of your basic rate band is taxed at 18%, and everything above it at 24%. A £45,000 salary uses most of the band already, so on a large gain the majority falls at 24%. On a low income the first slice is genuinely cheaper, which is why timing a sale for a year out of work, or after retiring, can be worth a great deal.
Sixty days, not next January
UK residential property has its own reporting deadline: 60 days from completion, through a Capital Gains Tax on UK property account, with the tax paid at the same time. This trips people up constantly because it is nothing like the self assessment timetable, and penalties begin as soon as it passes. The gain still goes on your tax return afterwards.
Where this stops and advice starts
The calculation assumes a property that Private Residence Relief does not cover, one owner, one sale in the year, and no other gains or losses to set against it. It does not model part-period relief where a rental was once your home, lettings relief, jointly owned property, or losses carried forward. Any of those change the answer materially, and a property sale is large enough that an hour with an accountant pays for itself.
Common questions
- Do I pay capital gains tax when I sell my own home?
- Normally no. Private Residence Relief exempts the home you have lived in throughout your ownership. This calculator is for property that relief does not cover: a second home, a holiday home, or a buy-to-let.
- What counts as a cost I can deduct?
- Stamp duty, legal fees and survey costs on the purchase, and estate agent and legal fees on the sale. Capital improvements such as an extension or a new kitchen count. Repairs, redecorating and mortgage interest do not.
- How long do I have to report and pay?
- Sixty days from completion for UK residential property, through a Capital Gains Tax on UK property account. This is much tighter than the self assessment deadline and the penalties start quickly.
- Why does my salary change the tax on the sale?
- The gain is stacked on top of your income. Only the part that fits in whatever remains of your basic rate band is taxed at 18%, and everything above it is taxed at 24%. A large gain uses up the band quickly, so most of it usually falls at the higher rate.
- Can I use my partner’s allowance too?
- If the property is jointly owned, each owner has their own annual exempt amount and their own bands. Transfers between spouses and civil partners are normally free of capital gains tax, so ownership can be rearranged before a sale. That is a decision worth taking advice on.