Capital Gains Tax on a Second Home UK (2026): What You Owe When You Sell

Yes — if you sell a residential property that has not been your only or main residence for the entire period you have owned it, capital gains tax (CGT) applies on any gain. The key relief that exempts your main home — principal private residence (PPR) relief — does not apply to a second property (unless you have lived in it as your main home for part of the ownership period): (1) WHAT IS A 'SECOND HOME' FOR CGT: any residential property in the UK (or worldwide if you are UK-domiciled) that you own but that is not your only or main home — including: holiday cottages; buy-to-let properties; a former main home kept after moving; a property you let out; a property gifted to you or inherited; a parent's home you own in your name; (2) PPR RELIEF — THE MAIN HOME EXEMPTION: PPR relief (TCGA 1992 ss.222-226) completely exempts any gain on a property that has been your only or main residence throughout the period you owned it. If a property was NEVER your main home: no PPR relief; all of the gain is chargeable (subject to the AEA); (3) THE 9-MONTH FINAL PERIOD EXEMPTION: ALWAYS applies on disposal of ANY residential property that has been your main home at some point. Specifically: the last 9 months of ownership is always treated as a qualifying period of main residence (even if you moved out earlier). For a property that was NEVER your main home at any point, the 9-month exemption does NOT apply; (4) CGT RATES (2025-26): Residential property disposals: 18% for basic rate taxpayers (gain when added to income does not exceed the basic rate band threshold of £50,270); 24% for higher or additional rate taxpayers. If part of the gain falls in the basic rate band and part in the higher rate band, the gain is split and taxed at the respective rates; (5) ANNUAL EXEMPT AMOUNT (AEA): £3,000 (2025-26 and expected to remain frozen). Each individual owner has their own £3,000 AEA to offset against chargeable gains in the tax year; (6) CGT CALCULATION: Base cost = purchase price + buying costs (SDLT; legal fees; survey) + capital improvements since purchase (new kitchen; extension; structural works — NOT routine repairs or maintenance); Gain = sale proceeds minus selling costs MINUS base cost. Chargeable gain = Gain minus PPR-exempt proportion (if any PPR applies) minus AEA = taxable amount × 18% or 24%.

If you ever lived in the property as your only or main home — even for a relatively short period — PPR relief can reduce the CGT liability significantly: (1) THE PPR CALCULATION: the exempt fraction is the proportion of the total ownership period during which the property was your only or main home (including the final 9 months of ownership in all cases). Formula: (PPR-qualifying months + 9 months) ÷ total ownership months × total gain = exempt amount. Remaining gain after exemption is the chargeable gain; (2) THE 9-MONTH FINAL PERIOD: if you ever lived in the property as your main home, the final 9 months of ownership is ALWAYS exempt — even if you had moved out years before. Example: you owned a property for 10 years (120 months); you lived there as your main home for 2 years (24 months) then moved out; you sell now. PPR-qualifying months = 24 + 9 (final period) = 33 months. Total ownership = 120 months. Exempt fraction = 33/120 = 27.5% of the total gain is exempt. 72.5% is chargeable; (3) THE SECOND PROPERTY NOMINATION (2-YEAR RULE): if you own two residential properties simultaneously and you occupy both (even occasionally), you can nominate which is your main home for PPR purposes. This must be done within 2 years of first occupying the second property. A valid nomination means the nominated property benefits from the full PPR and 9-month exemption on disposal. This is a very powerful planning tool for holiday homes or second properties you intend to sell. Late nominations can still be made but HMRC may challenge them; (4) ABSENCES THAT DON'T COUNT: various periods of absence can count as qualifying periods of main residence for PPR purposes even when you were not there — including: any period of employment anywhere in the UK working wholly away from home (up to 4 years); periods living abroad for employment (no time limit); any absence totalling up to 3 years (MCA 2005, condition: lived there before and after). These extend the PPR proportion; (5) LETTING RELIEF: from 6 April 2020, letting relief is only available where the owner was in shared occupation with the tenant (very rare for second homes). In practice, letting relief is no longer available for most let second homes.

From 6 April 2020, HMRC introduced a requirement to report and pay CGT on UK residential property disposals within 60 days of completion. This applies to second homes and all residential property subject to CGT: (1) THE 60-DAY RULE: within 60 days of the completion date of the sale (not the exchange date), you must: (a) Create or log in to your HMRC personal tax account; (b) Report the disposal via the 'Report and pay CGT on UK property' service; (c) Calculate and pay the estimated CGT liability. HMRC issues a payment reference number — pay through the digital service; (2) WHY BOTH EARLY AND AT YEAR-END: the 60-day return is a 'payment on account' — an estimate of CGT payable. The full calculation is finalised in your annual self-assessment tax return (due 31 January following the end of the tax year). Any over- or under-payment of CGT is reconciled at that point; (3) EVEN IF NO TAX IS DUE: for some disposals, CGT may be nil (fully covered by PPR, AEA, or losses). You may still need to report the disposal if it was a residential property sale and you are UK-resident. However, HMRC's guidance is that a return is only required when CGT is actually payable; (4) PENALTIES FOR LATE REPORTING: failure to report within 60 days results in: £100 automatic penalty (immediately after 60 days); further £300 or 5% of tax (whichever is higher) after 6 months; further £300 or 5% of tax after 12 months. Interest also accrues on unpaid CGT from the 60-day deadline; (5) JOINT OWNERSHIP: if the property is owned jointly (e.g. with a spouse or partner), each owner must report their own share of the gain separately on their own HMRC account; (6) NON-RESIDENTS: separate rules apply for non-UK residents selling UK property — the Non-Resident CGT (NRCGT) regime and returns apply, but that is beyond the scope of this England-focused guide; (7) CHECKLIST: (a) Note the completion date; (b) Within 60 days: log in to HMRC personal tax account; report and pay; (c) Keep all documents (completion statements; original purchase deeds; improvement receipts) for at least 4 years for HMRC enquiries.

Married couples and civil partners have specific CGT advantages when selling a second home that can significantly reduce the overall tax bill: (1) NO CGT BETWEEN SPOUSES: transfers of assets between spouses and civil partners living together (on a 'no gain, no loss' basis — TCGA 1992 s.58) do NOT trigger CGT. This means: a spouse with a higher rate tax band can transfer part-ownership to a lower-rate spouse before sale; the gain is then split proportionately; each pays CGT at their own marginal rate (18% basic vs 24% higher); (2) EACH SPOUSE HAS THEIR OWN AEA: each has a £3,000 AEA (2025-26). For a couple with a joint gain of £50,000: each has £25,000 gain; each uses their £3,000 AEA; each pays CGT on £22,000. At 24% each = £5,280 each = £10,560 total. vs. single-owner: £50,000 gain − £3,000 AEA = £47,000 × 24% = £11,280. Saving: £720 from the additional AEA; (3) TIMING TRANSFERS BEFORE SALE: transfer of a share of the property must occur before exchange of contracts. HMRC does not accept a transfer at exchange or completion as a genuine arm's-length transfer — it must happen in advance with a proper legal deed; (4) PPR NOMINATION — ONE PROPERTY PER COUPLE: for married couples and civil partners living together as a couple, there can only be one main residence at a time (TCGA 1992 s.222). If the couple owns two properties, they must nominate which is their main home (within 2 years of acquiring the second). The couple can only elect for one property to be the main residence at any one time; (5) IF ONE SPOUSE ALREADY HAS A LOSS: CGT losses from other disposals (shares, other property) can be offset against the gain from the second home in the same tax year. Losses are individual — spouses cannot share losses between themselves; (6) USING THE BASIC RATE BAND: if one spouse has unused basic rate band (their income is below £50,270 and the gain when added to income stays below the threshold), their share of the gain is taxed at 18% not 24%. This is a 6 percentage point saving on that portion of the gain.

Owning a second home creates several interactions with inheritance tax and estate planning that are worth understanding: (1) CGT UPLIFT ON DEATH — SECOND HOMES: when the owner of a second home dies, the CGT 'uplift' applies (TCGA 1992 s.62). This means: the beneficiary inherits the property at the date-of-death market value (probate value). The gain accumulated during the owner's lifetime is NOT charged to CGT. Only gains arising after the date of death (above the probate value) are subject to CGT for the beneficiary. This is a major estate planning consideration — if a second home has appreciated significantly and IHT exemptions cover the estate, there may be no IHT and no CGT on the pre-death gain; (2) SECOND HOME AND IHT: the second home is an estate asset and subject to IHT at 40% above the nil-rate band (£325,000 + up to £175,000 RNRB — but RNRB only applies to the deceased's residential home passed to direct descendants, not to second homes/buy-to-lets); (3) LEAVING THE SECOND HOME TO CHILDREN: the children inherit at probate value; if they sell quickly, minimal CGT arises; if they hold it and it appreciates, CGT applies on the further gain from probate value. Children should note the 60-day reporting requirement applies to them as personal representatives selling during administration OR as beneficiaries selling after assent; (4) AVOIDING GIFTING TO AVOID CGT: giving a second home away during lifetime is WORSE for CGT than dying with it. A gift triggers CGT at the date of gift (at market value above base cost — TCGA 1992 s.17). Hold-over relief under s.165 is NOT available for residential property (unless it qualifies as a business asset — very unlikely for a holiday home). So a gift of a second home triggers CGT immediately; death provides CGT rebasing; (5) WILL PLANNING FOR SECOND HOMES: consider who inherits the second home carefully: (a) A beneficiary in the basic rate band pays 18% CGT; a higher-rate beneficiary pays 24%; (b) A charity inheriting a property pays no CGT (charitable exemption — TCGA 1992 s.256); (c) For a second home with a large unrealised gain, death is the CGT-efficient route.