Capital Gains Tax on selling a second or inherited home

By CareFinder Team · Published 2026-06-30 · Last reviewed 2026-09-18

Capital Gains Tax is charged on the profit when you sell a second home, buy-to-let or inherited property, not on the sale price. For inherited property the starting value is its worth at the date of death. For 2026/27 you have a £3,000 allowance, residential gains are taxed at 18% or 24%, and you must report and pay within 60 days.

You pay Capital Gains Tax on the profit, not the sale price, when you sell a second home, a buy-to-let or an inherited property for more than it cost you (or, if inherited, more than it was worth when the person died). After the annual tax-free allowance, residential gains are taxed at 18% or 24% for 2026/27, and you must report and pay within 60 days of completion.

This is general information. Tax on property can be complicated, especially where a home was lived in for part of the time or is jointly owned, so check your position with HMRC or a qualified tax adviser before you sell.

When does Capital Gains Tax apply to property?

Capital Gains Tax (CGT) is charged when you sell or give away an asset that has risen in value. You normally do not pay it on your only or main home because of Private Residence Relief. According to GOV.UK's guide to tax when you sell property, you may have to pay it when you sell:

• a second home or holiday home
• a buy-to-let or other rental property
• a property you inherited
• land or business premises

Gifts count too. If you give a property to your children, it is treated as a sale at market value, so tax can be due even though no money changes hands. Gifts to a spouse or civil partner you live with, or to a charity, are not taxed at the time.

How is the gain worked out?

The gain is broadly the sale price minus what the property cost you, less allowable costs. You can usually deduct:

• the purchase price (or the value at the date of death, for an inherited property)
• Stamp Duty Land Tax and legal fees paid when buying
• estate agent and solicitor fees when selling
• the cost of improvements, such as an extension

Normal maintenance and decorating do not count. Keep receipts and completion statements; without them you may not be able to prove your costs.

Illustration: if a second home cost £200,000, you spent £10,000 on an extension and £6,000 on buying and selling costs, and you sell for £290,000, the gain is £74,000. Your annual allowance is then taken off before the tax rate applies.

What are the rates and allowance?

GOV.UK's Capital Gains Tax rates page gives the figures for 2026/27:

• Tax-free allowance (annual exempt amount): £3,000 for individuals.
• Residential property: 18% on any gain that falls within your basic-rate income tax band, and 24% on the rest.

To work out which rate applies, add the taxable gain to your taxable income for the year. The part that fits within the remaining basic-rate band is taxed at 18%; anything above is taxed at 24%. Many people pay a mix of both. The allowance and rates can change, so check GOV.UK for the year of your sale.

Scotland sets its own income tax bands, but Capital Gains Tax uses the UK rules, so the basic-rate band used for CGT is the UK one.

What if you inherited the property?

You do not pay CGT when you inherit. Any Inheritance Tax is dealt with by the estate. CGT only becomes relevant when you later sell or give the property away.

Your starting value is the value at death

For CGT, your cost is the property's value at the date of death, usually the value agreed for Inheritance Tax or probate. Your gain is the difference between that value and the eventual sale price, less selling costs and your allowance. If the property is sold by the executors during the administration, the estate may pay any tax instead of the beneficiaries, so ask the executor how the sale is being handled.

If you move in

If you make the inherited property your only or main home, Private Residence Relief can cover the period you live there, reducing the gain that is taxable when you sell.

If it sells for less

If the sale price is below the value at death, you may have a capital loss, which you can report and set against other gains. Separately, where land or buildings are sold by the estate for less than the probate value within four years of death, the estate may be able to claim back some Inheritance Tax. Ask the executor or a tax adviser.

How does Private Residence Relief work?

If a property was your main home for part of the time you owned it, relief usually covers:

• the periods you genuinely lived in it as your main home
• the final 9 months of ownership, even if you had moved out (a longer period can apply to some disabled people and people moving into care)

Only the remaining share of the gain is taxable. You can have only one main home at a time for this relief, and married couples and civil partners can have only one between them. If you have more than one home, you can usually nominate which is your main home by writing to HMRC within two years of the combination of homes changing. GOV.UK explains the rules on tax when you sell your home.

Lettings relief is now limited to people who shared their home with a tenant while living there themselves.

When must you report and pay?

For UK residential property with tax to pay, you must report the sale and pay the estimated tax within 60 days of completion, using HMRC's online "Capital Gains Tax on UK property" account. If you complete a Self Assessment tax return, you also include the sale there. Late reports and late payments can bring penalties and interest.

You do not need to report within 60 days if there is no tax to pay, for example because the gain is covered by your allowance or relief. Keep your working in case HMRC asks.

How does a sale affect paying for care?

Families often sell a second or inherited property to fund a relative's care. Two points to understand:

• Your own sale: CGT is your own tax, based on your own income and gains, even if you use the money to help with care fees.
• Your relative's sale: if the property belongs to the person needing care, it is counted as capital in the council's financial assessment. The main home can be ignored in some situations, such as when a partner still lives there, but a second property normally is not. In England, for 2026/27, anyone with capital above £23,250 usually pays their own care fees.

Giving property away to avoid care fees can be treated by the council as deliberate deprivation of assets. Take advice before transferring any property.

Legitimate ways to reduce the bill

• Claim all allowable costs, including improvements and buying and selling fees.
• Use your allowance, and consider timing if you are selling more than one asset.
• Consider joint ownership with a spouse or civil partner. Transfers between spouses or civil partners who live together are not taxed at the time, and each has their own allowance and basic-rate band. Take advice first, as the transfer must be genuine.
• Set off losses from other assets sold in the same or earlier tax years, if they were reported.
• Check Private Residence Relief for any period the property was your main home.

Frequently asked questions

Do I pay Capital Gains Tax when I inherit a house?

No. Tax is only due if you later sell or give away the property and it has risen in value since the date of death. Inheritance Tax, if any, is a separate matter for the estate.

How long do I have to pay CGT on a property sale?

For UK residential property, you must report and pay within 60 days of completion using HMRC's online service if tax is due. Missing the deadline can lead to penalties and interest.

What is the CGT allowance?

For 2026/27, individuals can make gains of £3,000 before tax is due. Above that, residential property gains are taxed at 18% within your basic-rate band and 24% above it.

Can I give the property to my children to avoid tax?

A gift is treated as a sale at market value, so CGT can still be due. Gifts can also have Inheritance Tax consequences and, if your relative may need care, can be treated as deprivation of assets. Take advice before giving property away.

Does selling a second home affect care funding?

If your relative owns it, yes. The sale proceeds or the property itself are counted as capital in the council's financial assessment, and above the upper capital limit your relative usually pays the full cost of care.

Key takeaways

• CGT is charged on the gain, not the sale price, for second homes, lets and inherited property.
• For inherited property, your starting value is the value at the date of death.
• For 2026/27 the allowance is £3,000 and residential rates are 18% or 24%.
• Report and pay within 60 days of completion if tax is due.
• Private Residence Relief can reduce the tax if the property was ever your main home.
• Take advice before gifting property, especially if care fees may follow.