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You can rarely avoid Capital Gains Tax on property completely, but you can cut it legally. In 2026/27, gains are taxed at 18% or 24% after your £3,000 annual exempt amount, and Private Residence Relief, spouse transfers, allowable costs and timing the sale can all reduce the bill.
Our personal tax accountants help landlords and homeowners find every relief they qualify for. This guide covers the main strategies for the 2026/27 tax year.
Capital Gains Tax is a tax on the profit you make when you sell or give away an asset that has gone up in value, such as a second home or rental property. You pay tax on the gain, not the full sale price.
The gain is the sale price minus what you paid and your allowable costs, such as legal and estate agent fees. Reliefs and your annual exempt amount then reduce what’s taxable.
Here’s how to keep that bill down within the rules.
Gains on residential property are taxed at 18% within your basic rate band and 24% above it. The higher rate fell from 28% to 24% on 6 April 2024.
Most other assets have been taxed at the same 18% and 24% rates since 30 October 2024. The annual exempt amount for 2026/27 is £3,000.
Every individual gets a CGT annual exempt amount, which is £3,000 for 2026/27. Gains below it are tax-free, and any unused amount can’t be carried forward.
Spouses and civil partners each have their own allowance. If you own a property jointly, you can shelter up to £6,000 of gain between you.
Tip: If you’re selling more than one property or asset, spreading the sales across two tax years lets you use two annual exempt amounts.
Transfers between spouses or civil partners who live together are treated as no gain, no loss, so no CGT is due on the transfer. The partner who receives it takes on the original cost for when they later sell.
Moving a share to a partner with unused allowance or basic rate band can lower the tax on the eventual sale. Their gains are taxed at 18% within that band and 24% once they’re a higher rate taxpayer.
Note: The exemption doesn’t apply if you separated and didn’t live together at all in that tax year.
If the property was your main residence at any point during ownership, you may be eligible for Private Residence Relief. This can reduce or eliminate the capital gains tax liability.
Say you lived in a home for 8 years and then let it out for 2. Private Residence Relief covers the 8 years plus the final 9 months, so only about 15 months of the gain is taxable.
There’s no minimum period. HMRC says the test is the quality of your occupation, not its length, so the property must have genuinely been your home.
If it was your only or main home at some point, the final 9 months of ownership always qualify for relief.
Yes. Some periods of absence still count as living in your home, as long as you lived there before and after, unless your work prevented you.
| Reason for absence | Period that still qualifies |
| Any reason | Up to 3 years in total |
| Working elsewhere in the UK | Up to 4 years |
| Working outside the UK | Any length of time |
Lettings relief only applies if you lived in the home at the same time as your tenant. It’s capped at the lowest of £40,000, your Private Residence Relief, or the gain made on the let part.
A lodger who shares your living space doesn’t count, though their rent may fall under the Rent a Room Scheme. Landlords who moved out and let the whole home can no longer claim lettings relief.
You can deduct the costs of buying, selling and improving the property, which reduces the taxable gain.
Common allowable deductions:
Taking these off your gain can bring it under your annual exempt amount or keep more of it in the 18% band.
Yes. A capital loss on another asset is deducted from your gains in the same tax year, and unused losses can be carried forward.
You must claim a loss within 4 years of the end of the tax year you made it. Losses from earlier years are only used to bring your gain down to the £3,000 allowance, not below it.
Your CGT rate depends on your taxable income in the year you sell. A career break, retirement or quieter trading year can leave more of your basic rate band free.
Gains that fall within the basic rate band are taxed at 18% on residential property, compared with 24% above it.
Strategy: If you can, time the sale for a year when your income is lower.
Pension contributions that get relief at source also extend your basic rate band, so more of the gain may be taxed at 18%.
Some government-backed schemes let you defer CGT. The main one for property sellers is the Enterprise Investment Scheme.
Reinvesting a gain in qualifying EIS company shares can defer the CGT until you sell those shares. You may also get Income Tax relief, but EIS shares are high risk.
Business Asset Disposal Relief applies when you sell all or part of a qualifying business, not a rental property. The rate rose from 10% to 14% on 6 April 2025 and to 18% on 6 April 2026.
The furnished holiday lettings regime was abolished from 6 April 2025. Holiday lets are now treated like other rental properties.
Holding investment property through a limited company can suit portfolio landlords. Companies pay Corporation Tax on their gains instead of CGT.
The main rate is 25%, with a 19% small profits rate for profits of £50,000 or less and marginal relief in between. Profits kept in the company can be reinvested in more property.
Warning: Moving existing properties into a company can trigger Stamp Duty Land Tax, CGT and mortgage problems. Take advice before you move anything.
If you sell an inherited property, CGT is due on the rise in value since the date of death, using the value agreed for Inheritance Tax (the probate value) as your cost. Inheritance Tax is a separate tax that may already have applied to the estate.
To reduce your tax bill:
Timing can make a real difference to your CGT bill. The rate depends on your total taxable income for the year, including the gain.
If you’re a basic rate taxpayer, plan the sale so the gain doesn’t push you far into the higher rate band. Selling in a lower-income year also helps you make full use of the £3,000 annual exempt amount.
Deduct every allowable cost, from estate agent and solicitor fees to improvement work. If the property was ever your home, check how Private Residence Relief and lettings relief apply.
Divorce, separation or the death of a spouse can change how a gain is taxed. Take advice on timing before any of these events.
If you’re a UK resident and sell a UK residential property with CGT to pay, you must report and pay within 60 days of completion. Non-residents must report every UK property sale within 60 days, even when no tax is due.
A landlord with £40,000 of taxable income sells a buy-to-let flat in 2026/27. These are the figures.
| Item | Amount |
| Sale price | £320,000 |
| Less selling costs (agent and legal fees) | £5,000 |
| Less purchase price | £200,000 |
| Less buying costs (Stamp Duty Land Tax and legal fees) | £8,000 |
| Less improvement costs (extension) | £15,000 |
| Gain | £92,000 |
| Less annual exempt amount | £3,000 |
| Taxable gain | £89,000 |
| £10,270 at 18% (unused basic rate band) | £1,848.60 |
| £78,730 at 24% | £18,895.20 |
| Capital Gains Tax due | £20,743.80 |
The landlord must report and pay this within 60 days of completion. If the flat had been their home for part of the time, Private Residence Relief would reduce the gain first.
UK residents generally pay CGT on gains from property anywhere in the world. You still report the gain to HMRC, even if the country where the property sits taxes it too.
Where both countries tax the gain, you can usually get relief in the UK for the tax paid abroad. Cross-border rules are complex, so get offshore tax advice before you sell.
Professional advice is often the key to cutting CGT on property legally.
A qualified tax adviser or financial adviser can help:
Above all, they keep you on the right side of the law. Tax planning is legal, but tax evasion is a crime.
There are many legal ways to reduce Capital Gains Tax on property, but it’s rarely possible to avoid it completely. Using your annual exempt amount, timing the sale, claiming reliefs and planning with your spouse or civil partner all help.
If you’re preparing to sell a buy-to-let, second home or inherited property, start planning before you agree a sale. Our property tax specialists can check which reliefs apply to you.
Book a free initial consultation before you agree a sale.
Usually not, if it was your only or main home for the whole time you owned it. Private Residence Relief can be limited if your grounds, including buildings, are 5,000 square metres or more, or part of the home was used only for business.
Transfers between spouses or civil partners who live together are treated as no gain, no loss, so no CGT is due on the transfer. The partner who later sells uses the original cost to work out the gain.
You can deduct buying and selling costs such as Stamp Duty Land Tax, legal fees and estate agent fees. Improvement costs count too, but repairs and decorating don’t.
Gains on residential property are taxed at 18% within your basic rate band and 24% above it. Your income in the year of sale decides how much of the gain falls in each band.
Yes, you get a new annual exempt amount each tax year, which is £3,000 for 2026/27. Any unused amount can’t be carried forward, so plan sales accordingly.
UK residents selling UK residential property must report and pay any CGT due within 60 days of completion. Non-residents must report every UK property sale within 60 days, even when no tax is due.
There’s no minimum period, because HMRC looks at the quality of your occupation rather than its length. If it was your main home at some point, the final 9 months of ownership always qualify for relief.
Yes. Capital losses are deducted from gains in the same tax year, and you must claim a loss within 4 years of the end of the tax year in which you made it.
