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Capital Gains Tax (CGT)

Tax paid on the profit made when selling a residential investment property, charged at 18% for basic rate taxpayers or 24% for higher rate taxpayers as of 2025/26.

Capital Gains Tax (CGT) is charged on the profit (gain) made when you dispose of an asset that has increased in value. For residential investment property in the UK, CGT applies at the point of sale or transfer.

The gain is calculated as: sale price minus original purchase price minus allowable costs. Allowable costs include the original SDLT, legal and professional fees on purchase, the cost of capital improvements made during ownership, and legal and agent fees on sale. Routine maintenance and repairs are not allowable against CGT (though they are allowable against income tax).

CGT rates for residential property (2025/26): - Basic rate taxpayers: 18% on gains - Higher rate taxpayers: 24% on gains - Annual CGT exemption: £3,000

The 60-day reporting rule requires CGT on UK residential property to be reported to HMRC and paid within 60 days of the completion date. This is separate from the annual self-assessment return and applies even if the taxpayer would normally file annually.

Private Residence Relief exempts gains on a property that has been your main home throughout the period of ownership. Investment properties that you have never lived in do not qualify.

Worked example
A property bought for £130,000 in 2018 is sold in 2026 for £195,000. Original SDLT was £5,100. Legal fees on purchase: £1,800. Capital improvements: £12,000 (new extension). Sale agent fees: £2,900. Allowable base cost = £130,000 + £5,100 + £1,800 + £12,000 + £2,900 = £151,800. Gain = £195,000 - £151,800 = £43,200. Less annual exemption £3,000 = £40,200 taxable. Higher-rate taxpayer: CGT = £40,200 x 24% = £9,648. Reportable and payable within 60 days of completion.
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