Do You Pay Tax When You Sell Your House UK?

In the UK, you don’t usually pay tax when selling your main residence. But if you sell a second home, buy-to-let property, or inherited home, you may be liable for Capital Gains Tax (CGT). Whether or not you pay depends on the type of property, your circumstances, and the gain made on the sale.

This guide explains when CGT applies, how much you might pay, how to calculate it, and how to reduce your bill legally.

What Taxes Do You Pay When Selling Your House in the UK?

There is no specific "property sales tax" in the UK, but you may have to pay Capital Gains Tax if the property is not your only or main home. If the home you’re selling is your primary residence and you've lived in it for the entire time you’ve owned it, you're normally exempt under Private Residence Relief.

However, if it’s a second home, rental property, or an inherited property that has gained in value, CGT may apply on the profit you make.

What Is Capital Gains Tax and When Do You Pay It?

Capital Gains Tax is charged on the profit (gain) you make when selling an asset that’s increased in value. With property, CGT is only due on the gain above your annual tax-free allowance.

In the 2024–25 tax year, the CGT allowance is £3,000 per person. Gains above this are taxed at:

• 18% for basic rate taxpayers

• 24% for higher or additional rate taxpayers
  (both rates apply specifically to residential property)

When Might You Have to Pay Capital Gains Tax on Your UK Home?

You may need to pay CGT if:

• The property was not your main home for the entire period you owned it

• You let the property out at any point

• You inherited it and it increased in value before sale

• You bought the property as an investment

• You used the property partly for business purposes

• The property has development potential or significant land attached

In these cases, Private Residence Relief may not apply in full, and CGT could be due on all or part of the gain.

Do You Pay Capital Gains Tax When Selling a Second Home?

Yes. Selling a second home will almost always trigger a CGT bill if you make a gain above the allowance. The same applies to holiday homes or homes that were previously let out.

For example:

• You bought a second property for £150,000 and later sold it for £250,000

• Your gain is £100,000

• After the £3,000 allowance, the taxable gain is £97,000

• As a higher rate taxpayer, you’d pay 24%, which equals £23,280 in tax

If you own the property jointly with someone else, both owners get the £3,000 allowance, reducing the overall CGT liability.

I’m Selling a Buy-to-Let Property – Do I Pay Capital Gains Tax?

Yes. Buy-to-let properties are classed as investment assets, and any gains are liable for CGT. The same rules and rates apply as with second homes, although lettings relief may reduce the amount owed in some cases if you previously lived in the property.

You can deduct allowable costs like:

• Estate agent fees

• Solicitor fees

• Stamp duty paid at purchase

• Improvements to the property (not repairs)

This reduces the size of the gain before CGT is applied.

Do I Pay Capital Gains Tax on Inherited or Gifted Property?

You don’t pay CGT when you inherit property. But if you sell the inherited property later and it has increased in value since the date of inheritance (probate value), CGT may be due.

If a property is gifted to someone who is not your spouse or civil partner, CGT can apply as if the property was sold at market value, even if no money changes hands.

This means gifting property to children could create a CGT liability straight away.

How Much CGT Will I Pay – And How Can I Reduce My Bill?

You can reduce your CGT bill by:

• Using your annual CGT allowance

• Splitting ownership with a spouse to double the allowance

• Deducting purchase and sale costs such as legal and estate agent fees

• Deducting capital improvement costs, like extensions or renovations

• Claiming Private Residence Relief or Lettings Relief where eligible

• Selling in a year where your income is lower to stay in the basic rate band

• Offsetting capital losses from other investments against the gain

How Do I Calculate My Capital Gains Tax Bill?

Step 1: Determine the sale price and deduct allowable costs (agent fees, legal fees)
Step 2: Subtract the purchase price and any capital improvements
Step 3: Calculate the gain
Step 4: Subtract your CGT allowance (£3,000 for 2024–25)
Step 5: Apply the correct tax rate based on your income

Use HMRC’s Capital Gains Tax calculator or consult an adviser if unsure.

When Do I Have to Pay My Capital Gains Tax Bill?

If you sell a UK residential property and CGT is due, you must report and pay it to HMRC within 60 days of completion. This applies whether you're a UK resident or not.

You must report the gain using HMRC’s UK Property Reporting Service, and late reporting can lead to penalties and interest.

What About Selling Overseas Property?

If you're UK tax resident and sell a property abroad, you may still have to pay CGT in the UK. You might also need to pay tax in the country where the property is located.

If there's a double taxation agreement in place, you may be able to offset foreign tax paid against your UK CGT bill.

What About Inheritance Tax?

Inheritance Tax (IHT) applies when a property is passed on after death, not when it’s sold. However, if you inherit a property and then sell it, CGT may apply on any gain since the date of inheritance. The two taxes are separate but can interact depending on timing and values.

Final Thoughts

You don’t usually pay tax when selling your main home in the UK, thanks to Private Residence Relief. But if the property is a second home, rental property, or inherited asset, Capital Gains Tax can apply and lead to a significant bill.

Knowing when CGT applies, how it’s calculated, and what reliefs are available can help you plan ahead and keep more of your gain. Always seek advice if you’re unsure, especially for large gains, gifts, or inherited property sales.