Knowing how to work out capital gains tax on property UK sales isn’t as difficult as it looks once you break the process into clear stages. In outline: you take what you sold the property for, deduct what you paid for it plus your allowable costs, take off any relief you’re entitled to and your £3,000 tax-free allowance, then apply either 18% or 24% depending on your income for the year. This guide walks through each of those steps in order, with a full worked example at the end, so you can work out your own figure with confidence before you report it to HMRC.
Step 1: Check Whether You Need to Pay at All
The first step in how to work out capital gains tax on property UK is simple: before doing any maths, confirm the disposal is actually taxable. You usually won’t owe Capital Gains Tax if:
- The property has been your only or main home for the whole time you’ve owned it (Private Residence Relief may cover the entire gain)
- You’re transferring it to your spouse or civil partner as a genuine gift
- You’re gifting it to a registered UK charity
- Your total gains for the year, across all assets, are below your £3,000 Annual Exempt Amount
If none of these apply — for example, you’re selling a buy-to-let, a second home, or an inherited property — you’ll need to work through the full calculation. Our guide on whether you need to pay Capital Gains Tax covers the eligibility rules in more depth.
Step 2: Gather Your Figures
You’ll need the following before you can calculate anything:
- The sale price (or market value, if you gave the property away or sold it to a connected person for less than it’s worth)
- The original purchase price (or the market value on the date you inherited it, or its value on 31 March 1982 if you owned it before then)
- Receipts or records for legal fees, estate agent fees, and Stamp Duty Land Tax paid on purchase
- Records of any improvement works, such as an extension or a loft conversion (routine maintenance and redecoration don’t count)
- Dates: when you bought it, when you sold it, and, if it was ever your home, the period you lived in it
Step 3: Calculate Your Basic Gain
When you work out how to work out capital gains tax on property UK sales, your starting point is simple:
Gain = Sale Price − Purchase Price − Allowable Costs
This is the core formula for how to work out capital gains tax on property UK. Allowable costs include the incidental costs of buying and selling (legal fees, agent fees, Stamp Duty Land Tax) and the cost of genuine capital improvements. You cannot deduct mortgage interest, routine repairs, or normal running costs like insurance and utility bills. For the full list of what does and doesn’t count, see our detailed guide on how Capital Gains Tax is calculated in the UK.
Step 4: Apply Private Residence Relief, If Any Applies
If the property was your main home for only part of the time you owned it — for example, you lived in it before renting it out — you can apportion the gain using Private Residence Relief:
Exempt Gain = Gain × (Qualifying Months ÷ Total Months of Ownership)
Two details are easy to miss here. First, the final nine months of ownership always count as qualifying, even if you’d already moved out, provided the property was your main home at some point (this extends to 36 months if you or your spouse are disabled or have moved into residential care). Second, if you shared occupation of the property with a tenant during a period that also qualified as your main residence, a restricted form of letting relief may reduce the gain further, capped at whichever is lower: £40,000 or the amount of Private Residence Relief already given. Our Property CGT calculator applies both of these automatically once you enter your ownership and occupation dates.
Step 5: Deduct Your £3,000 Annual Exempt Amount
Once you’ve applied any reliefs, deduct the 2026/27 Annual Exempt Amount of £3,000 from what’s left of your gain. This allowance applies once per person per tax year, across all your gains combined, not per property. If you own the property jointly, each owner applies their own £3,000 allowance against their share of the gain. Our guide to the Capital Gains Tax allowance for 2026/27 explains how couples and joint owners can make the most of multiple allowances.
Step 6: Work Out Your Rate — 18% or 24%
This part of how to work out capital gains tax on property UK matters most: the rate you pay on what’s left depends on your income for the year, not on the property itself. Since the Autumn Budget 2024 reforms, residential property is taxed at exactly the same rates as shares and other chargeable assets:
- Work out your taxable income for the year (income minus your Personal Allowance and any Income Tax reliefs).
- Add your taxable gain (after reliefs and the Annual Exempt Amount) to that figure.
- Whatever falls inside the £37,700 basic rate band is taxed at 18%. Whatever falls above it is taxed at 24%.
If your income already exceeds £50,270, the whole gain is taxed at 24%. Our companion guides on Capital Gains Tax for basic rate taxpayers and Capital Gains Tax for higher rate taxpayers cover each scenario with additional worked examples.
Step 7: Put It All Together — A Full Worked Example
Suppose you bought a buy-to-let flat for £180,000, including £3,000 of legal and agent fees. You later spent £15,000 adding a conservatory. You sell it for £280,000, paying £6,000 in agent and legal fees on the sale. You’ve never lived in the property, and your taxable income for the year is £40,000.
- Sale price: £280,000
- Less selling costs: £280,000 − £6,000 = £274,000
- Less purchase price and buying costs: £274,000 − £180,000 = £94,000
- Less improvement costs: £94,000 − £15,000 = £79,000 gain
- No Private Residence Relief applies (never your home)
- Less Annual Exempt Amount: £79,000 − £3,000 = £76,000 taxable gain
- Add to taxable income: £40,000 + £76,000 = £116,000, which is well above the £37,700 basic rate band
- Remaining basic rate band available: £37,700 − £40,000 = none (your income alone already exceeds it)
- Entire £76,000 gain taxed at 24%: £18,240 Capital Gains Tax due
That worked example shows exactly how to work out capital gains tax on property UK in practice. Change any of the inputs — income, purchase price, ownership history — and the answer shifts. Rather than redoing this by hand, our Property CGT calculator runs the full calculation, including Private Residence Relief and letting relief, in under a minute.
Step 8: Report and Pay Within 60 Days
UK residential property is different from other assets in one important respect: you must report the disposal and pay any tax owed within 60 days of completion, using HMRC’s CGT on UK Property Account. This applies even if you also complete a Self Assessment return, and even if you’re confident there’s little or no tax to pay. Missing the deadline triggers an automatic penalty, plus interest on any tax paid late.
If you’re selling from overseas, the same 60-day rule applies to non-UK residents disposing of UK property, alongside additional reporting requirements. Our Non-Resident CGT service and CGT Returns (HMRC) service handle this filing on your behalf, so you don’t risk a penalty on top of the tax itself.
Special Case: Inherited Property
This is one area where how to work out capital gains tax on property UK gets tricky: if the property you’re selling was inherited, your “purchase price” for the calculation isn’t what the original owner paid — it’s the market value of the property on the date they died. Our dedicated guide on how capital gains are calculated on inherited property covers this and the interaction with Inheritance Tax in full.
Common Mistakes: How to Work Out Capital Gains Tax on Property UK
- Forgetting Stamp Duty Land Tax counts as an allowable cost and leaving it out of the calculation entirely.
- Claiming routine repairs or redecoration as “improvements”, when only genuine capital improvements qualify.
- Not apportioning Private Residence Relief correctly when a property was only sometimes your main home.
- Missing the automatic final-nine-months exemption, even after moving out.
- Reporting late because the 60-day deadline was confused with the Self Assessment deadline of 31 January.
- Using the original purchase price on an inherited property instead of its probate value at the date of death.
Frequently Asked Questions
How do I work out capital gains tax on property if I only rented it out for part of the time?
You apportion the gain using Private Residence Relief, based on the number of months it was your main home (plus the automatic final nine months) compared with your total period of ownership. Any remaining gain is taxed at 18% or 24% depending on your income.
What costs can I deduct when working out capital gains tax on a property sale?
You can deduct the original purchase price, legal and agent fees on both the purchase and sale, Stamp Duty Land Tax, and the cost of genuine improvements. Mortgage interest and routine maintenance are not deductible.
Do I still need to report the sale if I made a loss?
You don’t need to pay tax on a loss, but you may still want to report it to HMRC so the loss is on record and can be offset against gains in future years.
How quickly do I need to pay Capital Gains Tax after selling a property?
Within 60 days of completion, using HMRC’s CGT on UK Property Account, regardless of whether you also complete a Self Assessment return for the same tax year.
Is the calculation different for a property I inherited rather than bought?
Yes. You use the property’s market value at the date of death as your acquisition cost instead of an original purchase price, then follow the same steps from there.
How to Work Out Capital Gains Tax on Property UK: Let Us Run the Numbers for You
Now that you know how to work out capital gains tax on property UK step by step, getting each deduction and relief right can be the difference between an accurate bill and an overpayment. Use our Property CGT calculator for an instant, detailed estimate, or book a free consultation with our specialists to have your property disposal reviewed and your 60-day return filed correctly.
