This article is for information only. John Charcol is a mortgage broker and is not authorised to give tax advice. If you’re selling a second home, buy-to-let, or inherited property, it’s sensible to speak to a qualified tax adviser for guidance based on your circumstances.
If you sell a property that is not your main home, you may have to pay Capital Gains Tax (CGT) on the profit you make. In most cases, CGT is one of the key tax considerations for landlords and second-home owners when they come to sell.
Who pays Capital Gains Tax on a second home?
In broad terms, CGT can apply when you sell:
- A second home (such as a holiday home)
- A buy-to-let property
- Land or property that is not your main residence
- An inherited property, where it is not treated as your main home for the full period of ownership
CGT is charged on the gain, not the sale price. The gain is essentially the difference between what you paid and what you sell for, after adjusting for allowable costs.
How to work out your capital gain
To calculate your gain, you normally:
- Start with the property sale price
- Subtract the price you originally paid
- Deduct allowable costs (where applicable)
- Apply the annual tax-free CGT allowance (if available)
Allowable costs that can reduce the gain
You may be able to deduct certain costs from the gain, which reduces the amount of CGT you pay. Common examples include:
- Solicitors’ fees and conveyancing costs
- Estate agent fees
- Stamp Duty and legal costs paid when buying (in many cases)
- Capital improvements that add value or extend the life of the property (not routine maintenance)
If you sell the property for less than you paid (after allowable costs), you may have made a loss, which can sometimes be used to offset other gains.
The CGT annual allowance in 2025/26
You get a tax-free CGT allowance (often called the “Annual Exempt Amount”). For the 2025/26 tax year, the allowance is £3,000 for individuals.
This means you only pay CGT on gains above that allowance (after allowable costs).
How much is Capital Gains Tax on second properties?
The rate you pay depends on your income position in the year you sell. Gains sit “on top” of your taxable income, which is why CGT can push some people into paying a higher CGT rate.
For disposals from 6 April 2025 onwards, CGT rates on residential property are:
- 18% (where gains fall within the basic rate band)
- 24% (where gains fall above the basic rate band)
These rates are specific to residential property gains. Other assets can be treated differently.
Worked example
Scenario
- Gain on sale: £100,000
- Allowable costs: £0 (for simplicity)
- Annual CGT allowance (2025/26): £3,000
- Taxable gain: £97,000
- Salary: £45,000
Step 1: Work out taxable income
£45,000 salary minus £12,570 personal allowance = £32,430 taxable income
Step 2: Work out how much basic rate band is left
Basic rate band (2025/26) is £37,700.
Remaining basic band: £37,700 − £32,430 = £5,270
Step 3: Apply CGT rates
- £5,270 taxed at 18% = £948.60
- Remaining taxable gain: £97,000 − £5,270 = £91,730
- £91,730 taxed at 24% = £22,015.20
Total CGT due: £948.60 + £22,015.20 = £22,963.80 (about £22,964)
Can you reduce CGT on a second home?
Searching for ways to “avoid” CGT is not the right framing. But there are legitimate reliefs and planning points that can reduce the bill in some cases.
Private Residence Relief (PRR)
If a property has genuinely been your only or main residence at some point, you may qualify for Private Residence Relief for the period you lived there.
In many cases, the final 9 months of ownership can also qualify for relief, provided the property has been your main residence at some point during ownership.
PRR can be material, but it is technical and fact-specific, which is why professional tax advice is important.
Deadlines: reporting and paying CGT when you sell UK residential property
If you sell UK residential property and CGT is due, you typically need to report and pay within 60 days of completion.
Missing the deadline can lead to interest and penalties, so timing matters.
What other costs should you expect when selling?
CGT is not the only cost associated with selling a second home. You may also have:
- Estate agent fees
- Solicitors’ fees
- Mortgage exit fees (if applicable)
- Potential early repayment charges (if the mortgage is still within a fixed/discount period)
Some selling costs can reduce the taxable gain, but you still need to fund them in real terms.
Final thought
CGT on second homes is often straightforward in principle, but complex in the detail. The key is understanding what counts as a gain, what costs can be deducted, whether any relief applies, and staying on top of reporting deadlines.
If you’re selling a property and want to sense-check how the sale might affect your mortgage options or onward purchase, we can help on the mortgage side, and we would always suggest taking tax advice alongside that.
