Capital Gains Tax (CGT) on property disposals

When selling your main residence (for tax purposes, known as your Principal Private Residence, or PPR), most people will be exempt from any Capital Gains Tax (CGT). However, if you’re selling a second property, CGT will likely apply, and it can be a significant tax bill.

Will my property qualify for PPR Relief?

PPR Relief applies for any periods of ownership during which the property has been occupied as the seller’s only, or main, residence. For rural properties, the legislation states that PPR Relief only applies to gardens and grounds up to half a hectare (1.24acres). This relief does not cover gains on non-permitted areas such as commercial workshops, holiday lets, or certain types of agricultural land, it must also include the land that is occupied by the PPR.

What are the CGT thresholds?

For higher-rate taxpayers, CGT is charged at 24% of the gain from the sale of residential property. The previous year (2023-2024) saw that CGT was charged at 28%.  Basic-rate taxpayers, however, pay CGT at 18%. These rates apply to second homes, rental properties, and other residential properties that don’t qualify for PPR Relief.

60-Day reporting and payment requirement

Since October 2021, taxpayers have 60 days to report and pay CGT after the completion of a property sale, gift or disposal.

Before the rules changed, CGT was payable as part of the self-assessment tax return, giving up to 22 months to make payment. Now, the CGT must be paid within 60 days. The shorter timeframe aims to accelerate the collection of CGT and applied to any property that does not qualify for PPR Relief.

Taxpayers are able to report the sale and pay the tax online, via bank transfer, or via post. This is a separate process from the annual self-assessment return, which means property sellers need to be particularly diligent about meeting the deadline to avoid penalties.

Failing to meet the 60-day reporting and payment deadline will result in penalties and interest charges. An initial £100 penalty is charged for missing the deadline, and this increases if the delay continues. The longer the delay, the higher the penalties, so it’s essential to act promptly.

Why is it important to keep detailed records in relation to CGT?

Whether you’re selling, gifting, or otherwise disposing of a property, keeping accurate records is crucial. You’ll need to provide HMRC with detailed calculations of the gain and the CGT due when reporting, so it’s important to ensure your records are thorough. You also need to make sure you have the funds ready to pay the tax within the 60-day deadline.

Do these rules apply to other types of property?

These rules apply specifically to residential properties, such as second homes and rental properties. For other property types, such as commercial buildings, different CGT rates and rules may apply. It’s important to check the specific tax treatment for the type of property you’re disposing of.