Do You Pay Capital Gains Tax When You Sell Your Home? 2026

By Lisa Hayes · 23 August 2026

Most people who sell their own home in the UK pay no Capital Gains Tax whatsoever. Private Residence Relief cancels the gain on the property you have lived in as your only or main home, and for the majority of sellers it does that completely, automatically, with nothing to file. A bill only appears when something breaks that clean line: years when you lived elsewhere, a part of the house let out or used exclusively for business, a garden larger than half a hectare, or a second property in the picture.

That is the short version. The long version matters, because the traps are specific and the deadline for paying is brutally short. Get it wrong and HMRC wants the money within 60 days of completion, with a penalty clock that starts on day 61.

What is Private Residence Relief, and why does it mean most sellers pay nothing?

Private Residence Relief (PRR) is the rule that stops the family home being taxed like an investment. It is set out in HMRC's helpsheet HS283, and it works by exempting the gain that arises during the period the property was your only or main residence.

You get the full relief where all four of these are true:

• the dwelling has been your only or main residence throughout your period of ownership
• you were not absent, other than for an allowed period of absence or because you were living in job-related accommodation
• the garden and grounds, including buildings on them, are not larger than the permitted area
• no part of the home was used exclusively for business

Meet all four and there is genuinely nothing to do. No calculation, no 60-day return, no entry on your Self Assessment. It applies to a flat, a houseboat or a fixed caravan just as much as a semi, and it applies whether you own the freehold, a lease or a share with someone else.

Note what PRR does not cover. Companies get no relief at all. And there is a curious sting in the tail: if you would have qualified for PRR but you sold at a loss, that loss is not allowable either. You cannot set it against other gains. The relief cuts both ways.

When does selling your own home actually trigger a Capital Gains Tax bill?

In practice there is a fairly short list of situations that turn a tax-free sale into a taxable one. If none of these describe you, stop reading and go and enjoy your completion day.

The one that catches most people is the third row. Someone moves in with a partner, keeps the old flat, rents it out "for a couple of years" and those couple of years turn into eleven. The clock has been running the whole time.

What is the final 9 months rule, and how much does it save you?

The last 9 months of your period of ownership always qualify for relief, regardless of what you were doing with the property in that window, as long as the house was your only or main residence at some point.

This exists precisely because sales take time. You move out in March, the sale drags, you complete in November. Without the final period exemption you would be handing HMRC a slice of the gain for the crime of a slow conveyancer.

Two details worth knowing. First, it used to be 18 months, and before that 36 — it was cut to 9 months from 6 April 2020, and plenty of online advice is still quoting the old figures. Second, if you are a disabled person or you have moved into a care home, the final 36 months can qualify instead, provided you do not have another relevant interest in a private residence. That matters enormously to families selling a home to fund care fees, where the sale can take a long time to arrange.

How do you work out the gain if you only lived there part of the time?

HMRC uses a time apportionment. You do not revalue the property at the moment your use changed, which surprises people who expect the calculation to reflect when prices actually rose.

The method:

1. Work out the total gain: sale proceeds minus what you paid, minus allowable costs.
2. Count the months you owned it.
3. Count the months it was your only or main residence, plus any allowed absences, plus the final 9 months if not already counted.
4. Multiply the total gain by (qualifying months ÷ total months). That part is exempt.
5. What is left is your chargeable gain, before the annual exempt amount.

Worked example. You bought a flat in September 2010 for £180,000 and sold it in September 2026 for £340,000. Costs of buying and selling came to £12,000. You lived there as your main home for the first 6 years, then moved in with a partner and let it out for the remaining 10.

• Total gain: £340,000 − £180,000 − £12,000 = £148,000
• Period of ownership: 192 months
• Qualifying months: 72 (residence) + 9 (final period) = 81
• Exempt: £148,000 × 81 ÷ 192 = £62,437
• Chargeable gain: £85,563, less the £3,000 annual exempt amount = £82,563

If you are a higher-rate taxpayer, that is roughly £19,800 at 24%. On a property you once called home. This is the single most expensive assumption in UK home selling: that because you lived there once, it is tax-free forever.

Does letting your old home out destroy the relief?

Not entirely, but the useful version of lettings relief was killed off in April 2020 and most people still expect the old rules.

Lettings relief now applies only where part of the house was let as residential accommodation at the same time as another part was your only or main residence. Shared occupancy. A lodger in the spare room while you lived there. If you moved out and let the whole house, lettings relief gives you nothing at all.

Where it does apply, the relief is the lowest of three figures: the PRR you have already calculated, £40,000, or the chargeable gain attributable to the letting. It can still be worth thousands to someone who took in a lodger for years, and it is doubled for a couple who jointly own.

One quirk from HS283 that is genuinely useful: a single lodger occupying rooms in your home does not restrict PRR at all — those rooms still qualify. It is two or more lodgers, or letting part of the property properly, where the restriction bites. If you are now selling a tenanted property, the tax position and the sale route are tangled together, and it is worth getting both straight before you list.

Does working from home cost you Private Residence Relief?

Almost never. The test is exclusive business use. A spare bedroom that doubles as an office and a place for your mother-in-law to sleep at Christmas is not exclusive business use, and full relief survives.

Where it becomes a problem is a genuine dedicated business space: a converted outbuilding used only as a salon or workshop, a surgery, a shop with a flat above. HS283 gives exactly that example — shop downstairs, living accommodation upstairs. You split the gain, the shop part is chargeable, the flat part is relieved.

The practical advice is simple. Do not create exclusivity where you do not need it. Keep some domestic use in the room, and you keep the relief.

What if you have a big garden, a paddock or land you are selling separately?

The permitted area is half a hectare — a shade over one acre — including the site of the house. Under that, everything is covered, including outbuildings sitting in the grounds.

Above half a hectare you may still get full relief, but only for the area "required for the reasonable enjoyment" of the house, judged against its size and character. A manor house can justify more land than a two-bed cottage. If HMRC queries it, the District Valuer decides, and you will need to explain your position in box 54 of the Capital Gains Tax summary pages.

Two traps here, and both are avoidable:

• Sell the land before or with the house, never after. If you dispose of all or part of the garden after you have sold the home, PRR is not available on it. That single ordering decision can cost tens of thousands.
• Do not fence it off or start development first. Land that has been divided off for development, or where excavation, roads or services have begun, stops qualifying. Get the sale done, then let the buyer develop.

Land let out or used for a business — surrounding farmland, a let paddock — is not treated as garden or grounds in the first place. If your sale involves an overage clause on development land, the tax and the contract need to be planned together.

You own two homes. Which one counts as your main residence?

You can only have one main residence at a time for PRR, and a married couple or civil partners who are living together can only have one between them.

You can choose. A nomination must be made within 2 years of the date you first have that particular combination of residences, and a new 2-year window opens whenever the combination changes. Miss it and HMRC decides on the facts — where your post goes, where you are registered to vote, where your family actually lives — and the facts rarely favour the answer that saves you money.

Nominating well is one of the few genuine, legal pieces of tax planning left in residential property. If you have two homes and you have never made a nomination, that is a conversation to have with an accountant this month, not after you accept an offer. For a property that has never been your main home, our guide to selling a second home and the CGT that comes with it covers the position in more detail.

What happens to Capital Gains Tax on divorce or separation?

Better than it used to. Since 6 April 2023, separating couples get up to three tax years after the year they stop living together to transfer assets between them on a no gain, no loss basis, and an unlimited period where the transfer is part of a formal divorce settlement.

PRR was extended at the same time. A spouse who moves out of the family home before it is sold can still claim relief, and where one partner transfers the house to the other but keeps a financial interest in the eventual proceeds, that share can also qualify.

None of that removes the pressure of a house that has to be sold to release equity for two households. If that is where you are, our guide to selling during a divorce deals with the practical mechanics, including what happens when one of you wants out faster than the other.

Do you pay Capital Gains Tax on an inherited house?

There is no CGT at the point of inheritance. Inheritance Tax is the estate's problem; CGT only enters the picture when the property is sold.

The base cost is the market value at the date of death — the probate value. If the house sells for roughly that, there is little or no gain. If it sits empty for two years while probate grinds on and the market moves, the growth since death is chargeable.

Who pays depends on timing. Sold by the personal representatives during the administration of the estate, the estate pays, with its own annual exempt amount available for the year of death and the two following tax years, and at the higher residential rate. Transferred to beneficiaries first and sold by them, each beneficiary uses their own £3,000 allowance and their own tax band, which is often the cheaper outcome for a family splitting a property several ways.

A word of warning on probate values. Undervaluing to save Inheritance Tax simply moves the gain into CGT and can trigger an HMRC challenge on both. Get a defensible valuation. If you are selling an inherited property, the empty-property costs — council tax premiums, unoccupied insurance, security — often outweigh the tax question anyway.

Does buying a wreck, doing it up and selling quickly count?

This is the rule almost nobody knows about, and it is sitting in plain sight in HS283. Even if you meet every condition, you do not get Private Residence Relief if you acquired the dwelling and spent money on it in order to realise a gain on its disposal.

Buy a run-down house intending to live in it, and the renovation is just what people do. Buy it with a spreadsheet and an exit price, live in it for eight months while the builders are in, sell, repeat — that is a different animal. HMRC can deny relief outright. Do it repeatedly and there is a further risk: the profits get treated as trading income and taxed at income tax rates plus National Insurance, which is considerably worse than 24%.

The same rule catches a tenant who buys out the freehold purely to increase the profit on a sale. Intention is what matters, and HMRC will look at the pattern.

What rate will you pay, and what can you deduct?

For 2026/27, residential property gains are taxed at 18% to the extent they fall within your remaining basic rate band and 24% above it. The annual exempt amount is £3,000 per person.

To find the rate, add the chargeable gain to your taxable income for the year. If the total pushes you past the basic rate threshold, the part above is taxed at 24%. Joint owners each get their own allowance and their own band, which is why a jointly owned property is usually taxed more kindly than one held in a single name.

• £3,000annual exempt amount per person
• 18% / 24%residential CGT rates 2026/27
• 60 daysto report and pay after completion
• 9 monthsfinal period always relieved

Deductible costs reduce the gain, and people routinely forget half of them:

Dig out the paperwork from the purchase. A twenty-year-old Stamp Duty receipt and the invoice for the extension can be worth more than an afternoon's work. If you are unsure what your property is realistically worth today before you start any of this, a current valuation is the starting point for every figure in the calculation.

The 60-day rule: how to report and pay

If UK residential property produces a taxable gain, you must report and pay within 60 days of completion. Not the tax return deadline. Not the following January. Sixty days.

How it works:

1. Set up a HMRC "Capital Gains Tax on UK property" account — this is separate from your Self Assessment account.
2. Submit the property return with the figures, the relief claimed and the calculation.
3. Pay the estimated tax by the same 60-day deadline.
4. Report the disposal again on your Self Assessment return for the year, where the final figure is reconciled and any over- or underpayment settled.

Penalties for missing it are mechanical and unsympathetic: £100 immediately from day 61, then further penalties at six and twelve months of £300 or 5% of the tax due, whichever is greater, with daily penalties possible in between. Interest runs on late tax at base rate plus 2.5%.

Non-residents have it stricter still. If you are non-resident you must tell HMRC within 60 days of completion of a disposal of UK land whether or not there is any tax to pay, including on commercial property. Our guide to selling a UK house from abroad covers the reporting and rebasing rules.

Does selling fast or below market value change your CGT?

This comes up constantly, and the answer is reassuring: for a genuine arm's-length sale, CGT is calculated on what you actually received, not on what an estate agent once told you the house was worth.

Sell to an unconnected buyer — including a cash buying company — at 80% of market value, and your proceeds for CGT are that 80%. A lower price means a lower gain and, where a gain is chargeable, a lower tax bill. It does not mean you can claim a loss for the discount.

Where it changes is a transaction that is not at arm's length. Sell to a connected person — a child, a sibling, a company you control — and HMRC substitutes market value for the actual price, so gifting the house to a family member at a token sum does not avoid the gain. That rule catches a lot of well-meaning family arrangements, and it applies even where no money changes hands. Selling to a relative is a different exercise entirely from selling to a cash house buyer, and the tax treatment is one of the reasons why.

Worth being clear-eyed about the trade-off, though. If you are weighing a fast sale, the discount is the price of certainty and speed, and you should understand exactly how far below market value those offers typically sit before you decide it is worth it. A CGT saving is never a good reason on its own to accept less for your home.

The mistakes that cost sellers the most

• Assuming "I lived there once" means tax-free. It means partially relieved. The fraction is unforgiving.
• Quoting the old 18-month final period. It has been 9 months since April 2020.
• Expecting lettings relief on a wholly let former home. Gone since April 2020 unless you shared the house with the tenant.
• Never making a main residence nomination. Two years, then the decision is made for you.
• Selling the paddock after the house. Sequence the disposals; do the land first or together.
• Losing the purchase paperwork. Undocumented improvement costs are usually undeductible costs.
• Missing the 60-day window. The penalty starts on day 61 whether or not you knew.
• Taking tax advice from a forum. Where a gain is in play, an hour with an accountant is the cheapest part of the transaction.

None of this is advice on your specific circumstances, and it is not meant to be. Capital Gains Tax on property has enough edge cases that if you think you have a chargeable gain, you should speak to a qualified accountant before you exchange, not after you complete. If the language in your solicitor's letters is slowing you down, our property jargon explained guide will help.

What to do before you accept an offer

Work out whether a chargeable gain exists at all. For most sellers it will not, and the whole subject becomes irrelevant the moment you confirm the property has been your only home throughout. If a gain does exist, get the calculation done before you agree a price, because the tax comes out of the same pot as your onward deposit, and 60 days after completion is a very short time to find £20,000 you had not budgeted for.

Then, separately, work out what the house is actually worth and what your realistic routes to sale are. Estate agent, auction, or a regulated cash buyer all produce different prices and different timescales, and the right answer depends on how much the certainty is worth to you. It costs nothing to compare offers side by side and see the numbers before you commit to anything.