Do You Pay Tax When You Sell Your House UK

Selling your home in the UK can be a financially rewarding experience, particularly if property prices have risen since you bought it. However, many homeowners ask whether they are liable to pay tax when they sell. The answer depends on a range of factors including whether the property was your main residence, how long you lived in it, whether you let it out or used it for business, and whether it was jointly owned or inherited.

This article explores the key rules on Capital Gains Tax (CGT) when selling residential property in the UK, who must pay it, when exemptions apply, how to calculate liability, and what steps to take to stay compliant with HMRC. It is written for homeowners, landlords, second home owners and property investors looking to understand the tax implications of selling a property.

What Is Capital Gains Tax on Property Sales?

Capital Gains Tax is a tax on the profit or ‘gain’ made when you sell something for more than you paid for it. In the context of property, this means you may be liable to pay CGT if you sell a home or investment property that has increased in value since you bought it. However, your main home is usually exempt from CGT thanks to a relief known as Private Residence Relief.

If the property was not your main residence for the entire time you owned it, or if you let it out or used it for business purposes, you may have to pay tax on part of the gain. CGT only applies to the increase in value, not the total sale price.

Do You Pay Tax When Selling Your Main Residence?

If the property you are selling has been your only or main residence for the entire period of ownership, you will usually not pay any Capital Gains Tax. This is because of Private Residence Relief, which exempts homeowners from tax when they sell their primary home.

To qualify, the property must have been your genuine main home and not used primarily as a rental or business space. The garden or grounds up to 5,000 square metres are also usually covered. If you live in the house, use it as your main address, and have not let it out or used part of it for commercial purposes, then any gain from the sale should be fully exempt from CGT.

When Might You Have to Pay Capital Gains Tax?

You may have to pay CGT on some or all of the profit if the property was not your main home throughout your ownership, or if you let it out to tenants, used it for business, or it was a second home or buy-to-let investment.

In such cases, CGT is payable on the portion of the gain that relates to the time the property was not your main residence. You may be entitled to partial Private Residence Relief and Letting Relief, depending on the dates of occupation and use. These reliefs are subject to strict conditions and have been narrowed in recent years, so it is important to check current HMRC guidance or seek professional advice.

How Do You Calculate Capital Gains Tax on a Property?

To calculate CGT, subtract the price you paid for the property (including purchase costs like legal fees and stamp duty) from the sale price (minus selling costs like estate agent and solicitor fees). The resulting figure is your ‘gain’. If the property has been your main residence for only part of the time, then that proportion of the gain may be exempt.

Once you know the taxable gain, apply any remaining reliefs and subtract your annual CGT allowance. For the 2025 to 2026 tax year, the annual exemption is £3,000 for individuals. The remaining taxable gain is then taxed at 18 percent for basic-rate taxpayers and 28 percent for higher or additional-rate taxpayers on residential property.

What If You Sell a Second Home or Buy-to-Let Property?

Selling a second home or an investment property that has not been your main residence will likely trigger a CGT liability. There are no automatic exemptions for these properties, though you can still deduct allowable expenses and use your CGT allowance.

You must report the sale to HMRC and pay any CGT due within 60 days of completion. This applies to UK residents selling UK residential property where tax is due. Failing to report the sale or pay on time can result in penalties and interest.

What If You Inherited the Property?

If you inherited a property and later sell it, CGT may be due on the increase in value from the date of inheritance to the date of sale. The value of the property at the date of death is considered the acquisition value for CGT purposes. If the property was never your main residence, you are unlikely to benefit from Private Residence Relief, though you can still deduct allowable costs and apply your annual exemption.

What About Joint Ownership and Transfers to Children?

If the property is jointly owned, each owner is taxed on their share of the gain. Both owners can use their CGT allowance and claim applicable reliefs. If you transfer property to an adult child while you are alive, it may still trigger a CGT liability, as the transaction is treated as a disposal at market value, even if no money changes hands.

Case Example

A retired couple in Kent sold their second home, which they had used as a holiday property for 20 years. They originally bought it for £120,000 and sold it for £340,000. After deducting allowable costs, their gain was £200,000. Since the property was never their main residence, they could not claim Private Residence Relief. Each spouse used their £3,000 allowance, and the remaining gain was split and taxed at 28 percent, as both were higher-rate taxpayers. They paid the tax within 60 days using HMRC’s online reporting service.

Conclusion

Whether or not you pay tax when you sell your house in the UK depends largely on how the property was used and whether it was your main residence. Most homeowners selling their primary home will not have to pay Capital Gains Tax, thanks to Private Residence Relief. However, if the property was let out, used for business, or was a second home or investment, a CGT bill may be due. Understanding how the tax is calculated, which reliefs apply and the reporting deadlines will help you avoid penalties and keep more of your profit.