Selling a property can trigger a sizeable Capital Gains Tax bill, but the amount you pay is not fixed. Depending on how the property has been used, a number of reliefs may reduce the gain, defer it, or remove it altogether. The key is to understand which reliefs apply to your situation, and to plan before you sell rather than after.
This guide explains the main reliefs for individuals, in plain terms.
The basics
Capital Gains Tax is charged on the profit you make when you dispose of an asset, not on the whole sale price. For residential property, individuals pay tax on the gain at 18% within the basic rate band and 24% above it. Everyone has an annual exempt amount, currently £3,000, which is deducted before tax is worked out.
One deadline catches people out repeatedly: if you sell a UK residential property at a gain, you must report it and pay the tax due within 60 days of completion, using a separate online return. This applies in addition to your normal Self Assessment return.
Your own home: Private Residence Relief
The most valuable relief of all is Private Residence Relief, which is why most people never pay any Capital Gains Tax when they sell the home they live in. Where a property has been your only or main residence throughout your ownership, the gain is generally fully relieved, and the final nine months of ownership are always covered even if you have already moved out.
Difficulties arise where a property has not always been your main home, or where you own more than one. In those cases, whether a property counts as your residence is a question of fact, and the courts look at several factors:
- Permanence. Temporary occupation is not enough; there must be a genuine degree of permanence and continuity.
- Intention. Even a short period of occupation can qualify if you genuinely intended to live there permanently and can show it.
- Evidence. The burden is on you to demonstrate both your occupation and your intention, so records matter.
If you genuinely have two residences, you may nominate which is to be treated as your main one, and there are time limits for doing so. Getting this nomination right can make a significant difference, so it is worth advice.
Property used in a business or trade
Where land or property has been used in a trade, further reliefs may be available:
- Business Asset Disposal Relief can reduce the Capital Gains Tax rate on qualifying business disposals. The relief rate rose to 14% for 2025/26 and to 18% from 6 April 2026, and there is a lifetime limit of £1 million of qualifying gains. Conditions apply, including minimum ownership periods.
- Rollover relief can defer the gain where the proceeds are reinvested in another qualifying business asset, generally within a window running from one year before to three years after the disposal.
- Gift relief can defer the gain where a business asset is given away or sold at undervalue, by effectively passing the gain to the person receiving it.
An important change to note: the furnished holiday lettings regime was abolished from April 2025. Properties that previously qualified as furnished holiday lets no longer benefit from the business reliefs in the way they once did, so if this affected you, your position should be reviewed.
Investment and let property
Reliefs are more limited for property held purely as an investment, such as a buy-to-let. There is no Business Asset Disposal Relief for an ordinary rental investment. However, depending on the scale and nature of the activity, options such as incorporation relief may be worth exploring, and careful timing of disposals and use of allowances can still reduce the overall bill.
The family home on divorce or separation
The family home is often the most valuable asset a couple owns, and separating creates particular Capital Gains Tax issues, because the partner who moves out may no longer be living in the property as their main residence. The rules in this area were improved in recent years, and now generally allow more time for transfers between separating spouses or civil partners to be made without an immediate tax charge, and allow the partner who has left to retain relief in certain circumstances, including where they will receive a share of the proceeds when the home is eventually sold. These rules are detailed and depend on the terms of your agreement or court order, so early advice is strongly recommended.
What to do
The single most useful thing you can do is take advice before you sell, not afterwards. Many of these reliefs depend on conditions being met, on reinvestment happening within set time limits, or on elections and claims being made correctly and on time. Once a property is sold, the opportunity to plan is usually gone.
At ISA Consortium, we advise homeowners, landlords and property investors across Hertfordshire and beyond on how to structure and time a sale to make the most of the reliefs available, and we handle the 60-day reporting for you. If you are thinking of selling, please get in touch before you do.
This article is for general information only and does not constitute tax advice. The reliefs summarised here are subject to detailed conditions, and your own position should be discussed with us based
