Capital Gains Tax when selling a home that was not your main residence

Selling a property that was not your main home normally means a Capital Gains Tax bill on the profit, and the tax has to be reported and paid within 60 days of completion rather than left to the following January¹. The rate on residential property gains is 18% for basic-rate taxpayers and 24% for higher or additional-rate taxpayers³.

The tax applies to second homes, buy-to-let property, business premises, land and inherited property, and it applies whether you sell or transfer the property to someone else¹. Your main home is different: if it has been your only or main residence for the whole time you owned it, there is normally no Capital Gains Tax to pay at all⁵.

Two things catch people out. The first is the deadline, which is much shorter than most tax reporting. The second is that a property which was once your main home can still qualify for relief, but only for the periods and the parts of it that were genuinely your home⁶.

Which property sales Capital Gains Tax applies to

Capital Gains Tax is a tax on profit you pay to HMRC when you sell certain assets⁹. Property is one of them, and the official list of what is caught is broad: buy-to-let homes, business property, land, and property that is not your home, including inherited property¹.

The dividing line is not the type of building but whether it was your main home. A flat you let out, a house you bought for a relative to live in, a plot of land, a shop with a flat above it and a cottage you inherited from a parent all sit on the taxable side of that line. A holiday home does too: it is property that is not your main home, and only one property can be your main home for relief purposes⁵.

There is a separate relief if the property is a business asset, which can reduce the gain¹. And if you sell at a loss rather than a profit, the loss can be used against other gains, which is covered in using capital losses to cut Capital Gains Tax.

Inherited property deserves its own note. Capital Gains Tax applies when you sell anything you inherited, and if the property was not declared to HMRC as your main home, tax is due on any profit when you sell it⁴. The gain is normally measured from the value at the date of death, so it is the increase since then that is taxed, not the whole value. Inheritance tax and Capital Gains Tax are separate taxes and both can apply to the same property¹².

Your main home is exempt, a second home is not

If a property has been your only or main residence for the entire time you owned it, and you have not rented it out or used part of it exclusively for business, there is normally no Capital Gains Tax when you sell it⁵. That relief is called Private Residence Relief, and it exists to encourage home ownership and mobility of labour¹³. There is a full explanation on Private Residence Relief: selling your home without Capital Gains Tax.

A second home does not get that treatment. Only one property can be your main home, and the extra inheritance tax allowance that applies to a home also applies only to your main home, though you are free to choose which property that is¹⁰. That choice matters, because nominating one property as your main home for one tax can affect how the other is treated.

Two smaller points are worth knowing. If you own a valuable personal possession jointly with someone else, the first £6,000 of your share is exempt from Capital Gains Tax, which shows how the tax works on assets generally¹⁴. And if you have a second home that you let out, the extra council tax charged on second homes does not apply to it¹⁵.

When a former main home qualifies for relief

A property that was once your main home is not automatically taxable. You may get tax relief if you sold a property that was your main home, and the relief is worked out by reference to the periods it was your home².

The relief is restricted in a list of situations. You may have a Capital Gains Tax bill if you develop your home, for example by converting part of it into flats; sell part of your garden totalling more than half a hectare; use part exclusively for business; let out all or part of it; moved out nine months or more before selling; or bought it to renovate and sell¹⁶. Each of those reduces the exempt portion of the gain rather than removing relief altogether.

There is a related relief on the stamp duty side that catches people moving home. If you sell or give away your previous main home in the 3 years after you buy your new home, you can apply for a refund of the higher rate part of your stamp duty bill¹⁷. That is a separate tax from Capital Gains Tax, but the two often arise in the same move.

Non-UK residents must report every UK property sale

If you are not UK resident for tax purposes, you may have to pay tax when you sell or dispose of your UK home, and the reporting duty is wider than for residents⁷. You must report all sales of UK property or land, residential and non-residential, even if you have no tax to pay⁸. The report is due within 60 days of transferring ownership⁷.

That is a genuine difference from the resident position, where a sale with no gain and no tax due does not need a return. For non-residents there is no such threshold: the sale itself triggers the report. You do not need to report or pay tax on anything else that has increased in value⁸.

If you are not resident in the UK and sell a UK residential property, you may have to pay Capital Gains Tax on the gains, and the residence rules that decide this are set out in HMRC's guidance on residence, domicile and the remittance basis¹⁸. If you are coming to the UK rather than leaving, the rules on when you become resident are on Moving abroad or to the UK: your residence status.

Living abroad also affects your other UK tax affairs. You usually have to send a Self Assessment tax return if you live abroad and you rent out property in the UK, have taxable savings interest from UK banks or building societies, have a pension outside the UK and were UK resident in one of the 5 previous tax years, or have any other untaxed UK income¹⁹. You do not need to report your income to HMRC if you have already claimed tax relief under a double-taxation agreement¹⁹. If you rent out a UK property while living abroad, the Non-resident Landlord Scheme applies.

How to report and pay Capital Gains Tax on a property sale

For UK residential property, the reporting is done through a residential property return with a payment on account, and it is due within 60 days of completion¹. This is not the same as the Self Assessment return, which comes later and covers the rest of your income and gains. The 60 day deadline applies to the property return regardless.

For assets that are not residential property, the reporting happens in the tax year after you sold or disposed of the asset, through Self Assessment²⁰. So shares, for example, follow the ordinary timetable while a house does not.

The rates you pay depend on your income. On residential property gains you pay either 18% if you are a basic-rate taxpayer or 24% if you are a higher or additional-rate taxpayer³. Those rates have been in place since 30 October 2024, when the rates on other assets also changed to 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, having previously been 10% and 20%²¹. Before that date the rate on other assets for basic-rate taxpayers was 10%⁶.

If you are selling a property that was never your main home, special tax rules apply and you need enough information to work out the taxable gain, which usually means records of what you paid, what you spent on improvements, and what you sold it for²². The gain is the profit, not the sale price.

Where the rules differ across the UK

Capital Gains Tax is a UK-wide tax set by Westminster, so the rates and the 60 day reporting deadline are the same in England, Scotland, Wales and Northern Ireland. What differs is the tax on the purchase, which is devolved.

In Scotland, Land and Buildings Transaction Tax applies to standard house purchases and to other types of land transaction²³. In Wales, Land Transaction Tax applies, and taxpayers must notify the Welsh Revenue Authority of all land transactions with a value above £40,000²⁴. The additional amount charged on transactions involving second homes or buy-to-let properties is part of that system²⁵.

There are reliefs within the Welsh system, including first-time buyer relief, and the list of reliefs is set out in the legislation²⁵. One change worth knowing about: on 7 February 2025, legislation relating to multiple dwellings relief was changed so that dwellings that are subsidiary, meaning worth less than a third of the total value of the transaction, must now be treated as part of the primary dwelling in any main rates residential transaction²⁴.

None of this changes your Capital Gains Tax bill when you sell. It changes what you pay when you buy, which matters if you are replacing one property with another.

Renting out a room, lodgers and business use

Taking in a lodger is not the same as letting out part of your home. Relief is lost where you let out all or part of the property, but a lodger in your own home is treated differently, and there is a separate relief for that on Rent a Room relief: letting a room in your home.

If you are a community landlord tenant, the position is different again. If you take in a lodger to rent a spare room, you will still be affected by the bedroom tax, and the rent received can be used to make up the bedroom tax deduction in your budget²⁶. If you receive Housing Benefit, you would not have to pay the bedroom tax but some of the money counts as income, which can affect your other benefits²⁷.

Using part of your home exclusively for business is one of the clearest triggers for a restricted relief. It appears on the list of situations that can create a Capital Gains Tax bill on your home, and it is also listed as a reason a non-resident selling a UK home may still owe tax despite qualifying for relief⁷. If you run a business from home, keeping a second business account to set aside money each month for income tax, National Insurance and VAT bills is one way to manage the cash flow¹².

If the sale is forced or the property is repossessed

Not every sale is a choice. If you are selling your home voluntarily because you can no longer afford the mortgage, you may have to pay capital gains tax when the sale is completed, but only if the value of the property has increased since you bought it and it is not your main home, for example if it has been rented to tenants²⁸.

If you are in financial difficulty, free and impartial help is available. Debt: a complete guide to help, solutions and your rights sets out the options, and the MoneyHelper service provides free guidance. If you are struggling with a tax bill, TaxAid gives free tax advice to people on low incomes.

Could the Budget change the rates?

The main rates of Capital Gains Tax were increased from October 2024, and the rates on assets other than property changed on 30 October 2024²¹. A Budget is due on 28 October 2026, and there are reported calls for the Chancellor to raise Capital Gains Tax in line with income tax rates²⁶. Nothing has been announced, so the current rates apply until a change is confirmed.

If you are weighing up whether to sell, the decision is about your circumstances rather than the tax alone. What the rules do is set out clearly what you would owe on a sale today, and what you would need to report and when.