Capital Gains Tax When Selling Property and Land

Selling property or land in the UK can create a Capital Gains Tax liability if the asset has increased in value since you bought, inherited or otherwise acquired it. This is especially relevant for second homes, buy-to-let properties, inherited property, business premises, agricultural land, development land and parcels of land sold separately from a main home.

Capital Gains Tax, often shortened to CGT, is charged on the gain you make, not on the full sale price. In simple terms, your gain is usually the sale proceeds minus your original purchase price and allowable costs. However, the rules can become more complex where the property was inherited, gifted, jointly owned, used as a main home, used for business, sold by a non-resident, or sold as part of a wider land or estate transaction.

This guide explains how Capital Gains Tax works when selling property and land in the UK, including current rates, allowances, reporting deadlines and common reliefs.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit made when you sell, transfer, gift or otherwise dispose of an asset that has increased in value. For property and land, this can include selling a buy-to-let, disposing of a second home, selling inherited property, selling agricultural land, selling business premises, or transferring land for less than market value.

HMRC taxes the gain rather than the amount received. For example, if you bought land for £200,000 and later sold it for £300,000, your starting gain is £100,000 before allowable costs, reliefs, losses and allowances are considered. HMRC explains the general rules in its guide to Capital Gains Tax.

Please note: This guide is for general information only and should not be treated as tax advice. HMRC rules can change and individual circumstances matter, so sellers should always speak to a qualified accountant or tax adviser before making decisions.

When does Capital Gains Tax apply to property and land?

You may need to pay Capital Gains Tax when selling property or land that is not fully covered by Private Residence Relief. This can include:

• Buy-to-let properties
• Second homes and holiday homes
• Inherited property that is not your main residence
• Land sold separately from your home
• Agricultural land
• Commercial property
• Business premises
• Mixed-use property
• Development land
• Part of a garden or grounds where full main residence relief is not available

HMRC specifically lists buy-to-let properties, business premises, land and inherited property as examples of property where Capital Gains Tax may apply. You can read HMRC’s overview of tax when you sell property.

Capital Gains Tax rates for property and land in 2026/27

For disposals from 6 April 2026 onwards, the main Capital Gains Tax rates for individuals are 18% and 24%. The rate you pay depends on your taxable income and the size of your taxable gain. Gains that fall within the remaining basic rate band are charged at 18%, while gains above that are charged at 24%.

For the 2026/27 tax year, the Capital Gains Tax annual exempt amount is £3,000 for individuals. This means only gains above the relevant tax-free allowance are normally taxable, after any allowable losses and reliefs have been applied.

Trustees and personal representatives of someone who has died pay Capital Gains Tax at 24% from 6 April 2026. Business Asset Disposal Relief, where available, gives an 18% rate for qualifying disposals from 6 April 2026.

The latest HMRC guidance is available here: Capital Gains Tax rates and allowances and Capital Gains Tax rates.

How to work out Capital Gains Tax when selling property

The basic calculation is:

1. Start with the sale proceeds.
2. Deduct the original purchase price or relevant market value.
3. Deduct allowable buying, selling and improvement costs.
4. Deduct any available reliefs or losses.
5. Deduct the annual exempt amount.
6. The remaining figure is the taxable gain.

You can usually deduct costs directly linked to buying, selling or improving the property. These may include estate agent fees, solicitor fees, valuation fees, advertising fees, Stamp Duty Land Tax and capital improvement costs, such as an extension or major upgrade. Normal maintenance, repairs and decorating usually do not count as capital improvement costs.

HMRC provides more detail on allowable costs in its guide to working out your gain when selling property.

Example Capital Gains Tax calculation

Imagine you bought a second home for £350,000 and sold it for £500,000. Your starting gain is £150,000.

You then deduct allowable costs, for example:

• Purchase legal fees: £2,000
• Stamp Duty Land Tax: £10,000
• Estate agent and sale legal fees: £8,000
• Qualifying improvement works: £20,000

Total allowable costs: £40,000. Your gain is reduced to £110,000. If you are an individual and have your full £3,000 annual exempt amount available for the 2026/27 tax year, your taxable gain becomes £107,000. The tax is then calculated at 18% and/or 24%, depending on your taxable income and how much of your basic rate band remains.

Private Residence Relief when selling your main home

In many cases, you do not pay Capital Gains Tax when selling your main home because Private Residence Relief applies. Full relief usually applies if you have one home, have lived in it as your main home for the whole period of ownership, have not let part of it out, have not used part of it exclusively for business, the grounds are less than 5,000 square metres, and you did not buy it purely to make a gain.

If the property has not always been your main home, has been let out, includes substantial land, or has been used partly for business, only part of the gain may be covered. This is where advice is important, especially for rural homes, large gardens, country houses, estates and properties with land attached.

HMRC explains the conditions in its guide to tax when you sell your home and its Private Residence Relief helpsheet.

Selling land separately from your home

Selling land separately can create a Capital Gains Tax issue, even where the land is connected to your home. For example, if you sell a paddock, a field, a building plot, woodland or part of your garden, HMRC may look at whether the land forms part of the permitted area for Private Residence Relief and whether it was enjoyed as part of the main residence.

The standard Private Residence Relief conditions refer to grounds of less than 5,000 square metres, just over one acre, although larger grounds can sometimes qualify if they are required for the reasonable enjoyment of the property. This can be a key point for country homes, period properties, farms and rural estates.

Land and lease disposals can also involve special valuation rules, especially where only part of the land is sold, the land has development potential, or the disposal is linked to a lease, compulsory purchase or business asset. HMRC provides a dedicated helpsheet on Capital Gains Tax for land and leases.

Selling inherited property or land

You do not usually pay Capital Gains Tax immediately when you inherit property. However, CGT may apply if you later sell the inherited property or land and it has increased in value since the date of death or since the value used for Inheritance Tax purposes.

For inherited property, the starting point is usually the probate value or market value at the date of death, rather than the amount originally paid by the person who died. If the inherited property becomes your main home, Private Residence Relief may apply for the period it qualifies as your main residence.

HMRC has guidance on tax when you inherit property and Capital Gains Tax when someone dies.

Selling buy-to-let property

Buy-to-let property is one of the most common reasons individuals face Capital Gains Tax. If you sell a rental property for more than your allowable base cost, you may need to report the gain and pay CGT.

You should keep records of purchase costs, sale costs and capital improvements throughout ownership. Some costs that cannot be deducted from rental income may still be relevant for Capital Gains Tax if they are capital in nature, such as adding an extension or replacing a kitchen with one of a higher specification.

Sellers should also check whether there has been any period of personal occupation, change of use, shared ownership, trust ownership or overseas residency, as these can all affect the calculation.

Selling agricultural land, farmland or estate land

Agricultural land and estate land can create more complex CGT questions than a straightforward residential sale. Issues may include whether the land is personally owned or held in a company, whether it is used in a trading business, whether it is let, whether there are development rights, whether the land is sold in lots, and whether any reliefs are available.

Business Asset Rollover Relief may be available where qualifying business assets are sold and the proceeds are reinvested into new qualifying assets. This can allow the CGT liability to be deferred rather than paid immediately, provided the conditions are met.

Business Asset Disposal Relief may also be relevant in some business sale situations, although it has strict conditions and the rate is 18% for qualifying disposals from 6 April 2026.

HMRC provides guidance on Business Asset Roll-over Relief and Business Asset Disposal Relief.

Selling commercial property or business premises

If you sell commercial property, business premises, offices, shops, workshops or other non-residential property, Capital Gains Tax or Corporation Tax may apply depending on who owns the asset.

Individuals, partnerships and trustees may fall within CGT rules. Companies usually pay Corporation Tax on chargeable gains instead of Capital Gains Tax.

Allowable costs for business assets can include valuation fees, advertising costs, improvement costs, Stamp Duty Land Tax and VAT where VAT cannot be reclaimed, but not normal repairs, loan interest or costs already claimed as business expenses. HMRC provides more detail in its guide to working out your gain on business assets.

Capital Gains Tax for non-residents selling UK property or land

Non-UK residents are generally still within the UK tax rules when selling UK property or land. This includes both direct disposals, such as selling a property, and some indirect disposals, such as selling shares in a UK property-rich company.

Non-residents must report sales and disposals of UK property or land to HMRC within 60 days of completion, even if there is no tax to pay or the disposal creates a loss.

For direct disposals, UK residential property includes dwellings, buildings suitable for use as dwellings, property being built or adapted as dwellings, gardens and grounds connected to dwellings, and rights to acquire off-plan UK dwellings. Non-residential property includes commercial property, agricultural land, forests and land not suitable for use as residential property.

HMRC provides more detail in its guidance on non-resident Capital Gains Tax on UK land and property .

Jointly owned property and transfers between spouses

If property or land is jointly owned, each owner calculates and reports their own share of the gain or loss. This can matter where ownership shares are unequal or where one owner has a different income tax position.

Transfers between spouses or civil partners who are living together are usually treated as taking place on a “no gain, no loss” basis. This means CGT is not usually triggered at the point of transfer, although the receiving spouse or civil partner may face CGT later when they dispose of the asset.

The rules are more complex after separation, divorce or dissolution. For transfers on or after 6 April 2023, spouses and civil partners may be able to transfer assets on a no gain, no loss basis up to the earlier of the end of the third tax year after separation or the date of a formal divorce, annulment or dissolution. Transfers made under a formal divorce or separation agreement or court order can qualify without a time limit.

HMRC explains this in its helpsheet on Capital Gains Tax for spouses and civil partners .

When do you report and pay Capital Gains Tax?

If you are a UK resident and sell UK residential property with CGT to pay, you must report and pay the tax within 60 days of completion. Missing the deadline can lead to penalties and interest.

If you are already registered for Self Assessment, you may also need to include details of the disposal in your Self Assessment tax return. HMRC asks for details including the property address, acquisition date, exchange date, completion date, purchase value, sale value, allowable costs and any reliefs or exemptions claimed.

For non-residents, all UK property and land disposals must be reported by the deadline, even if there is no tax to pay. For other capital gains that do not fall under the UK residential property reporting rules, HMRC’s general reporting and payment deadlines may apply.

See HMRC’s guide to reporting and paying CGT after selling UK property .

Common ways to reduce Capital Gains Tax legally

There are legitimate ways to reduce or defer a Capital Gains Tax bill, depending on your circumstances. These may include:

• Claiming Private Residence Relief where the property has been your main home
• Deducting allowable purchase, sale and improvement costs
• Using your annual exempt amount
• Offsetting allowable capital losses
• Considering timing where a sale may fall into a different tax year
• Reviewing ownership structure before sale
• Considering spouse or civil partner transfers where appropriate
• Claiming Business Asset Rollover Relief where qualifying business assets are replaced
• Reviewing whether Business Asset Disposal Relief applies to a business sale
• Keeping evidence of improvement costs, valuations and ownership periods

You can report allowable losses to HMRC and use them to reduce total taxable gains. Unused allowable losses can often be carried forward, provided they are reported correctly. HMRC explains this in its guide to Capital Gains Tax losses .

Records to keep before selling property or land

Good record keeping is essential. Before selling, gather purchase completion statements, sale completion statements, legal invoices, estate agent invoices, Stamp Duty Land Tax records, valuations, planning documents, improvement invoices, evidence of business or rental use, records of occupation periods, details of shared ownership and any probate valuation if relevant.

HMRC says you need records to work out gains and complete a tax return. You can read more in HMRC’s guide to Capital Gains Tax records .

Common Capital Gains Tax mistakes when selling property or land

A common mistake is assuming CGT only applies to second homes. In reality, it can also apply to land, inherited property, commercial property, mixed-use assets, business premises and parts of a main home that do not qualify for full relief.

Another mistake is calculating the tax based on the sale price rather than the gain. CGT is charged on profit after allowable costs, reliefs, losses and allowances, not on the full amount received.

Sellers also often overlook the 60-day reporting deadline for UK residential property. This is particularly important where the seller is not already in Self Assessment or assumes the tax can simply wait until the next tax return.

Why planning before sale matters

Capital Gains Tax should be considered before a property or land sale is agreed, not after completion. Once contracts have been exchanged, there may be fewer options available to manage the position.

For larger properties, estates, farms, development land and mixed-use assets, early planning can help clarify ownership, valuation, reliefs, timing and reporting obligations. It can also help avoid delays during the sale process, particularly where the buyer’s solicitor, accountant or lender raises questions about land use, planning status, tax history or ownership structure.

TPPG works with property owners across the UK where land, property and estate decisions require careful planning. While tax advice should always be taken from a qualified accountant or tax adviser, understanding the CGT position early can help sellers make more informed decisions before going to market.

FAQs

Do I pay Capital Gains Tax when selling my main home?
Usually not, provided the property qualifies fully for Private Residence Relief. You may have CGT to pay if the property has not always been your main home, has been let out, includes large grounds, has been used exclusively for business, or was bought mainly to make a gain.

How much is Capital Gains Tax on property in the UK?
For disposals from 6 April 2026, individuals pay Capital Gains Tax at 18% or 24%, depending on taxable income and the size of the gain. Trustees and personal representatives pay 24%. The annual exempt amount for individuals is £3,000 for the 2026/27 tax year.

Do I need to pay CGT when selling land?
You may need to pay Capital Gains Tax when selling land if it has increased in value and is not fully covered by relief. This can include agricultural land, development land, woodland, paddocks, commercial land and land sold separately from a home.

Do I pay CGT on inherited property?
You do not usually pay CGT immediately when inheriting property. However, CGT may apply if you later sell the inherited property for more than its value at the date of death or probate value.

Can I deduct estate agent and solicitor fees from Capital Gains Tax?
Yes, many buying and selling costs can be deducted when calculating your gain, including estate agent fees and solicitor fees. You can also usually deduct qualifying capital improvement costs, but not normal maintenance or decorating.

How long do I have to report Capital Gains Tax after selling property?
If you sell UK residential property and have CGT to pay, you usually need to report and pay within 60 days of completion. Non-residents must report UK property and land disposals within 60 days even if there is no tax to pay.

Can I reduce CGT by transferring property to my spouse?
Transfers between spouses or civil partners who are living together are usually on a no gain, no loss basis. This can sometimes help with tax planning, but it must be done properly and before the sale. Rules are more complex after separation or divorce, so advice should be taken.

Does Capital Gains Tax apply to non-UK residents?
Yes, non-residents can still be taxed when selling UK property or land. They must report UK property and land disposals to HMRC within 60 days of completion, even if there is no tax due or they made a loss.

What is the Capital Gains Tax allowance for 2026/27?
The Capital Gains Tax annual exempt amount for the 2026/27 tax year is £3,000 for individuals.

Should I get tax advice before selling property or land?
Yes, especially if the sale involves land, a second home, inherited property, business premises, agricultural land, development value, mixed-use property, trusts, non-residence, or more than one owner. CGT planning is usually most useful before contracts are exchanged.