CGT on Second Home 2026-27: Rates, PPR Apportionment

When you sell a second home in the UK—whether it's a buy-to-let, a holiday cottage, or a property you inherited—you'll usually owe Capital Gains Tax (CGT) on any profit you make. For the 2026-27 tax year, the rates are 18% if you're a basic-rate taxpayer and 24% if you're a higher or additional-rate taxpayer. You have a £3,000 Annual Exempt Amount (your tax-free allowance), and you must report and pay the tax within 60 days of completion. If you lived in the property as your main home at any point, you may be able to claim Private Residence Relief to reduce the taxable gain. This guide explains how CGT works on second homes, how to calculate what you owe, and what reliefs might apply.

What counts as a second home?

A second home is any UK residential property you own that isn't your main residence. Common examples include:

Buy-to-let properties you rent out to tenants
Holiday homes you use for personal breaks (even if you never let them out)
Inherited properties you've kept rather than sold immediately
Former main homes you've moved out of but still own
Properties bought for children or other family members

If you own only one property and live in it as your only or main home, that's usually exempt from CGT under Private Residence Relief. But the moment you own a second property—even if it's empty—any gain when you sell it is potentially taxable.

What about Furnished Holiday Lets?

Until 5 April 2025, properties that qualified as Furnished Holiday Lettings (FHLs) enjoyed special tax treatment, including access to business asset reliefs like Business Asset Disposal Relief. The FHL regime was abolished from 6 April 2025. This means that for sales in 2026-27, your holiday let is treated as an ordinary residential property for CGT purposes. You cannot claim business reliefs, and the residential CGT rates (18%/24%) apply in full.

How Capital Gains Tax works on second homes

The basic calculation

Capital Gains Tax is charged on your gain—the profit you make—not the total sale price. The calculation is:

Sale proceeds
minus Purchase price (what you originally paid)
minus Allowable costs (legal fees, estate agent fees, Stamp Duty, improvement costs)
= Gross gain

minus Annual Exempt Amount (£3,000 for 2026-27)
minus Any reliefs (e.g. Private Residence Relief)
= Taxable gain

You then pay CGT at 18% on any gain that falls within the basic-rate band, and 24% on any gain taxed at higher or additional rate.

Example: Mark sells a buy-to-let

Mark bought a flat in 2018 for £200,000. He spent £15,000 on a loft conversion in 2020. In December 2026 he sells it for £290,000. His costs on sale (estate agent, solicitor) come to £4,000.

Sale proceeds: £290,000
Purchase price: £200,000
Improvement costs: £15,000
Sale costs: £4,000
Gross gain: £290,000 − £200,000 − £15,000 − £4,000 = £71,000

Mark has no other capital gains this year, so he deducts his £3,000 Annual Exempt Amount:

Taxable gain: £71,000 − £3,000 = £68,000

Mark's salary is £60,000, so he's a higher-rate taxpayer. He pays CGT at 24%:

CGT due: £68,000 × 24% = £16,320

Which costs are allowable?

You can deduct:

Purchase costs: solicitor's fees, Stamp Duty Land Tax, surveyor's fees when you bought
Improvement costs: extensions, loft conversions, new kitchens or bathrooms (but not routine repairs or redecorating)
Sale costs: estate agent commission, solicitor's fees, Energy Performance Certificate

You cannot deduct:

Mortgage interest or repayments
Buildings or contents insurance
Routine maintenance, repairs, or redecoration (these are revenue expenses, not capital improvements)

The 60-day reporting and payment deadline

Since 27 October 2021, you must report and pay CGT on UK residential property within 60 days of completion [TCGA 1992 Sch. 2 para. 1]. This is a hard deadline. You report the sale and pay the tax using HMRC's online Capital Gains Tax on UK Property Account service (often called the "CGT property disposal service").

How the 60-day rule works

Day 1 is the completion date (when ownership legally transfers, not exchange of contracts).
You have 60 days from completion to file your return and pay the tax.
If you miss the deadline, HMRC will charge interest and may impose penalties.

You'll still need to report the disposal again on your Self Assessment tax return (if you complete one) for the 2026-27 tax year, but the 60-day report is separate and mandatory.

Example: Reporting deadline

Sarah completes the sale of her second home on 10 June 2026. Her 60-day deadline is 9 August 2026. She must file her CGT property return and pay the tax by that date. She'll also include the disposal on her 2026-27 Self Assessment return (due 31 January 2028 if filing online), but the bulk of the tax is already paid.

Private Residence Relief: if you lived in the property

If you ever lived in the second home as your only or main residence, you can claim Private Residence Relief (PRR) for the periods you lived there. This relief exempts part of the gain from CGT [TCGA 1992 ss.222-226].

How Private Residence Relief is calculated

PRR is given as a fraction:

(Months you lived there as main home + final 9 months) ÷ Total months you owned the property

You apply this fraction to your gain. The result is tax-free.

Important: You get an automatic final 9 months of relief, even if you weren't living there at the end (this used to be 18 months, then 36 months, but has been 9 months since April 2020).

Example: Emma's former main home

Emma bought a house in January 2016 and lived in it as her only home until December 2020 (5 years). She then moved in with her partner and rented the house out. She sells it in July 2026.

Total ownership: January 2016 to July 2026 = 126 months
Lived in as main home: January 2016 to December 2020 = 60 months
Final 9 months relief: automatic
Total relieved period: 60 + 9 = 69 months

PRR fraction: 69 ÷ 126 = 54.76%

If Emma's gross gain (after costs) is £80,000, then:

Relieved gain: £80,000 × 54.76% = £43,808 (tax-free)
Taxable gain before AEA: £80,000 − £43,808 = £36,192
Minus Annual Exempt Amount: £36,192 − £3,000 = £33,192
CGT at 24% (assuming higher rate): £33,192 × 24% = £7,966

Without PRR, Emma would have owed £80,000 − £3,000 = £77,000 × 24% = £18,480. PRR saved her over £10,500.

Lettings Relief has been abolished

Before April 2020, you could claim Lettings Relief if you rented out a property that was once your main home. This relief was abolished in April 2020. For sales in 2026-27, Lettings Relief is not available. You can only claim PRR for the periods you actually lived in the property (plus the final 9 months).

What rate of CGT do you pay?

The rate depends on your Income Tax position for the year.

Basic-rate taxpayers: 18% on residential property gains
Higher and additional-rate taxpayers: 24% on residential property gains

To work out which rate applies, HMRC treats your capital gain as the "top slice" of your income for the year.

Example: Straddling the basic and higher-rate threshold

Tom's salary in 2026-27 is £45,000. He sells a second home and (after the £3,000 AEA) has a taxable gain of £20,000. The higher-rate threshold is £50,270.

Tom's income uses up £45,000 of the basic-rate band.
He has £50,270 − £45,000 = £5,270 of basic-rate band left.
First £5,270 of gain taxed at 18% = £948.60
Remaining £14,730 taxed at 24% = £3,535.20
Total CGT: £948.60 + £3,535.20 = £4,483.80

Using losses and the Annual Exempt Amount

Annual Exempt Amount (£3,000)

Every UK resident individual gets a £3,000 Annual Exempt Amount for 2026-27. This is deducted from your total taxable gains for the year (across all assets, not just property). If you have gains below £3,000, you pay no CGT. If you're married or in a civil partnership, each of you has your own £3,000 allowance.

Capital losses

If you sold assets at a loss in the same tax year (or have losses brought forward from earlier years), you deduct these losses before applying the Annual Exempt Amount. Losses from previous years can be carried forward indefinitely, but you must have reported them to HMRC at the time.

You cannot create or claim a loss on a disposal to a connected person (spouse, civil partner, close family in some cases). HMRC will disallow it.

Common mistakes

Missing the 60-day deadline. This is the single most common error. Set a calendar reminder for 50 days after completion to give yourself breathing room. Late filing means interest and penalties.
Forgetting to claim Private Residence Relief. If you lived in the property at any point, even years ago, you may be entitled to relief. Always check your ownership timeline.
Deducting revenue costs as capital costs. Repainting, new carpets, boiler servicing—these are repairs and maintenance, not improvements. Only capital enhancements (extensions, conversions) are allowable.
Assuming the FHL regime still applies. The Furnished Holiday Lettings rules ended in April 2025. Your holiday let is now an ordinary residential property for CGT.
Not keeping records. You need proof of purchase price, improvement costs, and sale costs. Keep invoices, contracts, and bank statements for at least six years after the tax year of sale.
Ignoring the gain because "it's only small." Even a £4,000 gain is taxable (after the £3,000 allowance). You still must report it within 60 days.

Married couples and joint ownership

If you own the property jointly with your spouse or civil partner, you each report your share of the gain. By default, HMRC assumes you own 50/50 (even if the legal title says otherwise), but you can elect for a different split if you hold the property as tenants in common and have a declaration of trust.

Each of you gets your own £3,000 Annual Exempt Amount, so together you can shelter £6,000 of gain. Each of you must file a separate CGT property return within 60 days if your share exceeds the reporting threshold.

What to do next

If you've already sold (or are about to complete):

Gather your paperwork: purchase contract, sale contract, receipts for improvements, solicitor and estate agent invoices.
Calculate your gain using the steps above.
Register for and file a CGT on UK Property Account return within 60 days of completion. Pay the tax at the same time.
Include the disposal on your Self Assessment return for 2026-27 (due 31 January 2028 if filing online).

If you're planning to sell:

Consider the timing. If you have other capital gains or losses this year, or if your income will be lower next year, timing can affect your CGT bill.
Check if you're entitled to Private Residence Relief. Dig out old tenancy agreements, council tax bills, or utility bills that prove when you lived there.
If the sums are large or complicated (e.g. multiple periods of occupation, significant improvements, joint ownership), get professional advice before you exchange contracts.

Need help?

For quick questions about your specific situation—"Do I qualify for relief?" or "How do I report this?"—use the AI Tax chat at myaitax.info. You'll get an instant answer grounded in current HMRC rules.
For full-service support—calculation, reporting, filing, and peace of mind—speak to AI Accountant (also at myaitax.info). They can handle the entire process, ensure you claim all available reliefs, and meet the 60-day deadline on your behalf.

Selling a second home doesn't have to be stressful. With the right information and a clear timeline, you can calculate your tax, report on time, and move on to your next chapter.

CGT on Selling a Second Home (2026-27)