Capital Gains Tax (CGT) & Property Disposals in 2026

Capital Gains Tax on UK residential property has tightened materially across three recent budget cycles. The annual exempt amount fell from £12,300 in 2022-23 to £3,000 from April 2024 and has stayed there. The reporting and payment deadline shortened from "by 31 January following tax year" to a hard 60 days post-completion. The higher rate dropped from 28% to 24% in April 2024, but for the typical Harrow disposal at £150,000-£300,000 of gain, the cut is overwhelmed by the allowance reduction.

For most property investors the practical question is not academic. CGT on a Harrow property sold in 2026 typically runs £25,000-£75,000 and must be paid within 60 days of completion. Understanding the reliefs and the calculation mechanics is the difference between a clean transaction and a five-figure HMRC penalty.

2026 rates and the £3,000 allowance

• Basic-rate CGT: 18% on gains within the basic-rate band.
• Higher-rate CGT: 24% on gains above the basic-rate threshold.
• Annual Exempt Amount: £3,000 per individual.
• Spouses and civil partners each have their own £3,000 allowance.
• Trusts: half the allowance (£1,500) and 24% rate.

Calculating the gain

1. 1Sale proceeds (after estate agent fees and solicitor fees on sale).
2. 2Less: original purchase price.
3. 3Less: SDLT, legal and survey fees on purchase.
4. 4Less: capital improvements (extensions, new bathrooms, structural work).
5. 5Equals: gross gain.
6. 6Less: any Principal Private Residence Relief.
7. 7Less: any Lettings Relief (where it applies).
8. 8Less: annual exempt amount of £3,000.
9. 9Equals: taxable gain.
10. 10Apply 18% or 24% to determine CGT due.

Principal Private Residence Relief and Lettings Relief

Where the property was the seller's only or main residence at any point, Principal Private Residence (PPR) Relief exempts the gain pro-rata to the period of qualifying occupation:

• PPR exempts the gain pro-rata to the period of qualifying occupation.
• The final 9 months of ownership are always treated as qualifying occupation, even if the property was let during that period.
• Lettings Relief (post-April 2020 rules): only available where the owner shared occupation with the tenant. Capped at the lower of £40,000, the PPR-relieved gain, or the let-period gain.
• Spouses and civil partners can only have one PPR between them at any time.

Capital improvements vs revenue repairs

The capital/revenue distinction is the most common audit point on a CGT computation:

• Capital: improves the property, extends its life, or upgrades it (extension, new bathroom replacing none, double-glazed windows replacing single, change of use).
• Revenue: maintains the existing fabric (boiler replacement like-for-like, redecoration, repairs to a leaking roof).
• Capital expenses are deductible against the CGT gain on sale, not against rental profit during ownership.
• Revenue expenses are deductible against rental profit during ownership, not against the CGT gain.

Transferring to a spouse before sale

Inter-spouse transfers are exempt from both CGT and SDLT (provided no consideration changes hands):

1. 1Transfer 50% beneficial ownership to the spouse before completing the sale.
2. 2Both spouses use their £3,000 annual exempt amount, doubling the relief to £6,000.
3. 3If one spouse is a basic-rate taxpayer, their share is taxed at 18% rather than 24%, saving 6 percentage points on that half.
4. 4On a £130,000 gain, the spousal split typically saves £6,000-£10,000 of CGT.

Flipping: capital or trading?

A landlord who buys, refurbishes and sells within 6-18 months risks HMRC re-characterising the transaction as trading rather than capital:

• Trading profit: subject to income tax (up to 45%) and Class 2/4 NI, no CGT allowance, no PPR relief.
• Capital gain: subject to CGT (24% top rate), with annual exempt amount and any applicable reliefs.
• For a single £80,000 profit, trading treatment can cost £15,000-£25,000 more in tax.

HMRC's "badges of trade" test looks at frequency, holding period, motive, financing, refurbishment scale and whether the property was ever let. Two or three quick flips in succession typically pull the activity into trading; a one-off renovation-and-sell is more defensibly capital.

Recovering an overpaid CGT bill

CGT is paid within 60 days of completion at the seller's estimated rate. Where the rate paid was 24% but the seller turns out to be a basic-rate taxpayer for the year, the overpayment is recovered through the annual Self-Assessment return:

• File the 60-day return with the best estimate of the year's marginal rate.
• Pay the CGT due within the 60-day window.
• On the annual Self-Assessment, true up: total income confirms the actual rate, and any overpayment is refunded.
• For high-volume disposers, paying at the higher rate first and recovering on Self-Assessment is the safe default.