While buyers will need to consider any stamp duty costs when purchasing a property, sellers may wonder whether they need to pay tax when putting their home on the market.
We look at whether you need to pay tax when selling a house.
Will I need to pay capital gains tax when selling a house?
If you sell a house in the UK , you may need to pay capital gains tax (CGT) – and recent cuts to CGT-free allowances mean bigger bills for property owners.
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CGT is a tax charged by the government on profits (‘gains’) you make from selling something, in this case, property.
The amount of tax you pay depends on how much you’ve profited – usually the difference between what you paid for your house and the amount you got when you sold it.
Capital gains tax may be due if you make a profit when you sell (or ‘dispose of’ in HMRC terms) a house, but not always.
For example, CGT can be due on buy-to-let properties and inherited property. There are different rules if you sell your own home.
If CGT is due and you own the property jointly with other people, you’ll need to work out the gain for the share that you own. Married couples and civil partners can only count one property as their main home at any one time.
You can deduct the costs of buying, selling or improving your property from your gain, taking it off your CGT bill.
These include things like estate agents’ and solicitors’ fees, and the costs of improvement works, for example for an extension. Normal maintenance costs, such as decorating, do not count.
We look at 10 ways to cut your capital gains tax bill in a separate article.
Do you have to pay taxes on a sold home?
Most people selling their main residence won’t face a tax bill, thanks to rules that continue to exempt your primary home from CGT.
Karen Noye, mortgage expert at Quilter, explains: “As long as it’s been your only or main residence for the entire time you’ve owned it, and you haven’t let part of it out or used it exclusively for business, you’ll benefit from full private residence relief.
“That means no CGT to pay, regardless of how much the property has increased in value.”
Private residence relief is one of the most significant tax breaks still available to individuals in the UK and provides a valuable exemption at a time when allowances elsewhere are being squeezed.
The relief applies as long as you meet the following criteria:
- you have one home and you’ve lived in it as your main home for all the time you’ve owned it
- you have not let part of it out – this does not include having a lodger
- you have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use)
- the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
- you did not buy it just to make a gain
Noye says it’s important that sellers double check the rules – issues can arise if you’ve moved out before selling, if you’ve developed part of the property, or if it’s unusually large.
“When in doubt, seek advice before exchanging contracts,” she says.
Do I have to pay tax when I sell if I let out my home?
Capital gains tax may be due when you sell your main home if you let it out to a tenant at some point.
The exceptions are if you have a lodger who shares living space with you, or if your children or parents live with you and pay you rent or housekeeping. In these cases, CGT wouldn't be due.
How much you pay in CGT will depend on how long you lived in your home. This is because you’ll still be eligible for some private residence relief.
You get full relief for the years you lived in the home and the last nine months you owned the home – even if you were not living there at the time. So there will be no CGT to pay for that period.
For example, say you make a gain of £150,000 when you sell your home. You lived in the whole property for seven and a half years, then you let it out for seven and a half years.
Private residence relief applies for the whole time you lived there, in this case seven and a half years. You also get relief for the last nine months you owned the property, even though you were not living in it.
In total the private residence exemption from CGT applies for eight years and three months, which is 55% of the time you owned the property. So you get private residence relief on 55% of your gain.
This means you will not pay CGT on £82,500 of the gain. The remaining 45% (£54,000) of the gain not covered by private residence relief is your chargeable gain.
Minus from that the £3,000 annual CGT exemption allowance everyone is entitled to, and the final amount you have to pay tax on is £51,000.
Capital gains tax is due at 18% for basic rate taxpayers while higher and additional rate taxpayers face a 24% charge.
If you only let out part of your home, you’ll need to work out what proportion of your home you lived in. You only get private residence relief on this proportion of your gain.
Can I claim letting relief when I sell my home?
If you lived in your home at the same time as your tenants, you may qualify for what’s known as letting relief on gains you make when you sell the property.
Letting relief is the lowest of either the same amount you got in private residence relief, or £40,000, or the same amount as the chargeable gain you made while letting out part of your home.
Letting relief does not cover any proportion of the chargeable gain you make while your home is empty.
Say, for example, you rent out a bedroom in your home that equals about 5% of the size of your total property.
You make a chargeable gain of £100,000 when you sell your home. As 5% of your house was let out, you only get private residence relief for £95,000 (95% of the total gain).
However, as the remaining gain of £5,000 relates to the bedroom that was rented out you’re also entitled to letting relief of £5,000. This means you would pay no capital gains tax.
What taxes are due when selling a second home?
Selling a second property – whether a holiday home or a former buy-to-let – is where the tax bills can really bite. “These sales don’t qualify for private residence relief, so any profit made since purchase will likely be subject to CGT,” Noye points out.
In the 2025/26 tax year, the annual CGT exemption remains frozen at just £3,000 – a far cry from the £12,300 available just a few years ago.
After this small allowance, basic-rate taxpayers will pay 18% on the gain, while higher and additional rate taxpayers face a 24% charge.
Noye says: “It’s also crucial to remember that the deadline for reporting and paying CGT on UK property sales is just 60 days from completion – a tight turnaround that catches some sellers out.”
With property price growth over the years, many sellers could be looking at substantial gains, so planning ahead to understand what’s due and whether any costs or losses can be offset is essential.
Selling an inherited property when you already own a home
If you’ve inherited a property and already own your own home, then selling that inherited asset will normally trigger a CGT liability – even though you didn’t buy the property yourself.
The good news, says Noye, “is that tax is only due on the increase in value since the date of inheritance – not the original purchase price your parents or relatives paid”.
The same tax rules apply as with other second properties: you can use your £3,000 allowance, and then pay CGT at 18% or 24% depending on your income.
However, this can still result in a sizeable tax bill, particularly if there’s been a long delay between inheriting and selling, or if the property is in a high-growth area.
“Inheriting a property doesn’t attract CGT at the time, but it’s easy to forget there’s a bill waiting when you do eventually sell,” says Noye.
With many estates now also facing inheritance tax, it’s a reminder that even passing on the family home can come with a hefty tax double-whammy if proper planning isn’t in place.
How much CGT will I have to pay when I sell my house?
Once you have sold your house and worked out what your gain is, you can use the government's calculator to determine how much capital gains tax you’ll need to pay.
The calculator only works for property – it won’t be accurate if you have sold other chargeable assets in the tax year, for example shares.
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