How capital gains tax works on UK residential property in 2026/27: rates, the annual exemption, main residence relief, non-resident rules and 60-day reporting.
By Aldo Attanasio d’Aponte – September 9, 2026
Capital gains tax on London property: a guide for buyers and investors
Capital gains tax is a seller’s tax, but it is decided by the buyer. How you hold a London property, in whose name, whether you live in it, and what you record when you buy it, will determine the tax you pay when you sell, possibly decades later. The time to think about it is at acquisition, which is why we raise it with every client before they offer.
What is capital gains tax?
Capital gains tax, or CGT, is charged on the profit made when you dispose of an asset that has risen in value. For property, the gain is the sale price less what you paid, less the costs of buying, selling and improving it. It is not a tax on the whole sale price, and it is not payable if there is no gain.
“Disposal” is wider than sale. Giving a property away, transferring it into a trust, or exchanging it for another asset are all disposals at market value, and each can trigger a charge even though no money changes hands. The one important exception is a transfer between spouses or civil partners, which is treated as made at no gain and no loss; the receiving spouse inherits the original cost.
What are the rates in 2026/27?
For UK residential property, gains are taxed at 18% for a basic-rate taxpayer and 24% for a higher or additional-rate taxpayer. Rather than a flat rate, the gain is added to your income for the year, so a large gain will usually push most of it into the 24% band whatever your salary. The annual exempt amount, the first slice of gains that is tax-free, is £3,000 for an individual and £1,500 for most trusts. Companies pay corporation tax on their gains rather than CGT.
Rates and figures correct at the time of writing; confirm the current position before relying on them.
When is a home exempt?
Private residence relief exempts the gain on a property that has been your only or main residence throughout your ownership. The conditions are that you actually lived in it as your home, that no part of it was used exclusively for business, and that the grounds do not exceed half a hectare, about 1.25 acres, unless a larger area is needed for the reasonable enjoyment of the house.
Where a property has been your main residence for only part of the period of ownership, the relief is apportioned, and the final nine months of ownership are always treated as exempt provided the property was your main home at some point. Lettings relief, which once sheltered gains on a former home that had been let, is now confined to periods when the owner lived in the property alongside the tenant.
Two points that catch international clients. First, if you own more than one home, you may nominate which is your main residence, within two years of acquiring the second, and that choice can be varied; left to HMRC, the question is decided on the facts. Second, a non-resident can only claim main residence relief on a UK home for a tax year in which they spent at least 90 nights in it. A London house used for a few weeks a year does not qualify.
How does CGT apply to non-residents?
Since 2015, non-residents have paid UK CGT on gains from UK residential property, and since 2019 on commercial property and on shares in property-rich companies too. Gains are generally calculated from the value at April 2015 for residential property, or from acquisition if later, so a long-held property is not taxed on its entire history. Non-residents must report every disposal of UK property to HMRC within 60 days of completion, whether or not there is a gain and whether or not any tax is due. A missed return is penalised even where no tax was owed.
The same 60-day rule applies to UK residents where tax is payable on a residential disposal: a return and a payment on account within 60 days of completion, with the final figure settled through the annual self-assessment return.
What reduces the gain?
Costs of acquisition and disposal are deductible: stamp duty, legal fees, agents’ fees, survey fees. So are capital improvements that are still reflected in the property when sold, such as an extension, a basement or a full refurbishment, but not routine repairs or decoration. Keep the invoices. Many clients sell a house twenty years after buying it and discover that the £400,000 spent on works in year three has no paperwork left. That is a £96,000 mistake at 24%.
Losses on other assets in the same year, and unused losses carried forward from earlier years, can be set against the gain. Non-residents may only use losses from UK property. And, as above, the spouse exemption allows a family to make use of two annual exemptions and, sometimes, two lower tax bands.
How should a buyer plan for CGT?
At the point of purchase, three decisions matter. Whose name goes on the title, since a property held jointly by spouses can use two exemptions and two sets of bands on sale. Whether it is held personally or in a company, since a company pays corporation tax on gains and has no main residence relief, but may suit a portfolio held for the long term. And what records you keep, since every pound of documented improvement is a pound off the gain.
Then there is the question of use. A property bought as an investment and later occupied as a home, or bought as a home and later let, changes its CGT character, and the relief is apportioned. If you know now that the flat will be let in ten years’ time, say so when the structure is being decided.
I have always taken the view that a purchase in London is one line on a wider balance sheet, and CGT is the clearest example. The right answer for a Milanese family office with a portfolio of UK assets is different from the right answer for an individual buying their only home, and neither should be decided by the agent selling the property.
How Arbitrage can help
We are a buyer’s adviser, not a tax adviser, and we do not give tax advice. What we do is make sure the tax questions are asked before you offer, coordinate with your own accountant, private bank and solicitor so that the structure fits your wider position, and then find and negotiate the property. We have been doing this for private clients and family offices since 2006.
Frequently asked questions
Do I pay capital gains tax when I sell my London home?
Not usually, if it has been your only or main residence for the whole time you owned it and you lived in it as your home. If you owned another home, let it out, or were non-resident for part of the period, part of the gain may be taxable.
How long do I have to pay CGT after selling a property?
Sixty days from completion. UK residents must file a return and pay on account within that period when tax is due; non-residents must file within 60 days on every UK property disposal, even where there is no gain.
Is CGT payable when I give a property to my children?
Yes, in general. A gift is a disposal at market value and any gain is taxable in the year of the gift, although no money changes hands. Gifts of cash carry no CGT, which is one reason parents often prefer to fund a purchase rather than transfer a property.
Does CGT apply to property held in a company?
A UK company pays corporation tax on its gains rather than CGT, and a non-resident company is charged on UK property gains in a similar way. There is no main residence relief for a company, and separate annual charges can apply to residential property held through one, so the structure needs advice before purchase.