Capital Gains Tax on certain residential property sales must be reported and paid within 60 days to avoid penalties and interest.

The annual exempt amount applicable to Capital Gains Tax (CGT) is currently £3,000. CGT is normally charged at a simple flat rate of 24% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 18%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 24% CGT. 

These rates also apply to gains from the sale of residential property, except for a principal private residence (PPR), which is usually exempt from CGT. Most homeowners don’t pay CGT when selling their main family home but gains from other types of property may be taxable.

This includes:

• Buy-to-let properties
• Business premises
• Land
• Inherited property

Any CGT due on the sale of UK residential property must usually be reported and paid within 60 days of the completion date. This means a CGT return must be submitted and a payment on account made, within that 60-day window.

Failing to meet the deadline can lead to penalties and interest, so it’s important to plan ahead and ensure timely reporting whenever a non-PPR property is sold. And if required, we can help you with the computations and filing formalities.

The BADR Capital Gains Tax rate has risen to 14% from April 2025 and will increase further to 18% in April 2026.

Business Asset Disposal Relief (BADR) offers a valuable tax advantage by applying a reduced rate of Capital Gains Tax (CGT) on the sale of a business, shares in a trading company or an individual’s interest in a trading partnership.

As part of the measures announced in the Autumn 2024 Budget, the CGT rate for gains eligible for BADR has increased. For disposals made on or after 6 April 2025, the CGT rate has risen from the previous 10% to a higher rate of 14%. This change is now in effect and applies to any qualifying disposals taking place within the 2025–26 tax year.

Another forthcoming increase to the CGT rate under BADR is set to take place from 6 April 2026. It will rise to 18%. This means that disposals qualifying for BADR on or after this date will face a significantly higher tax charge compared to the original 10% rate that had long been associated with the relief.

The lifetime limit for claiming BADR remains at £1 million. This means that individuals can still benefit from the relief more than once, provided the cumulative gains across all qualifying disposals do not exceed this threshold.

Changes have also been made to Investors’ Relief. Specifically, the lifetime limit for Investors’ Relief was reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. In addition, the CGT rates for Investors’ Relief have now been brought in line with those of BADR currently at 14% and increasing to 18% from April 2026.

Selling your main residence? Private Residence Relief can exempt you from Capital Gains Tax. If you meet certain conditions, there may be nothing to pay.

In most cases, Capital Gains Tax (CGT) does not apply to the disposal of a property that has been used as your main family residence. This exemption known as Private Residence Relief can eliminate CGT entirely if certain conditions are met. However, the relief does not apply to investment properties that have never been used as your home.

To qualify for full Private Residence Relief, the following conditions must generally be satisfied:

1. The property has been your only or main residence throughout the entire period of ownership.
2. No part of the property has been let out, with the exception of taking in a lodger.
3. No area of the home has been used exclusively for business purposes. (Using a room occasionally or temporarily as a home office does not count as exclusive business use.)
4. The garden and grounds, including any outbuildings, do not exceed 5,000 square metres (just over an acre).
5. The property was not acquired with the sole intention of making a profit.

If a property has been your home at any point, the final 9 months of ownership are automatically treated as a period of qualifying residence for CGT purposes, even if you were not living there when the property was sold. In some limited circumstances, this final exempt period can be extended to 36 months (for example, where the homeowner moves into care or is unable to sell immediately).

Additional reliefs may also be available if the homeowner had to live or work away from home for extended periods.

It's also important to note that married couples and civil partners can only designate one property as their main home at any given time for tax purposes.

Business Asset Rollover Relief, allows taxpayers to defer Capital Gains Tax (CGT) on gains arising from the sale or disposal of certain business assets, provided the proceeds are reinvested into new business assets. Rather than paying CGT immediately, the gain is "rolled over" into the cost of the new asset, and the tax liability is deferred until that new asset is eventually sold.

If part of the proceeds from the original asset’s sale is reinvested, a partial rollover relief claim can be made. Taxpayers may also apply for provisional relief if they intend to purchase replacement assets but have not yet done so. Additionally, rollover relief may apply where the proceeds are used to improve existing business assets, not just to acquire new ones. The amount of relief available depends on how much of the proceeds are reinvested.

To qualify, certain conditions must be met. The replacement assets must be purchased within three years after, or up to one year before, the disposal of the old assets. In some cases, HMRC may extend these time limits. Both the old and new assets must be actively used in the business, and the business must be trading at the time of sale and acquisition. Finally, the relief must be claimed within four years from the end of the tax year in which the new asset was acquired, or the old one sold, if that occurred later.

Thinking of transferring your sole trader or partnership business into a limited company? Incorporation Relief can help defer any capital gains tax on assets like goodwill. If the entire business is transferred in exchange for shares, the relief applies automatically, no claim needed. Make sure you understand the rules and deadlines, especially if you plan to opt out.

When a sole trader or partnership transfers their business into a company, a capital gain may arise. The gain is based on the market value of the business assets (including goodwill) at the time of incorporation, compared to their original cost.

However, businesses incorporated in this way may qualify for Incorporation Relief. To benefit from this relief, the entire business, along with all its assets (excluding cash, if applicable), must be transferred as a going concern in exchange, wholly or partly, for shares in the new company.

Incorporation Relief is automatic if the conditions are met. There is no need to submit a claim. The relief defers the capital gain by reducing the base cost of the new shares by the amount of the deferred gain, effectively postponing any tax until the shares are sold.

Although the relief applies automatically, a taxpayer can elect for it not to apply. This must be done in writing, and the election must be submitted by 31 January, two years after the end of the tax year in which the incorporation occurred. For example, for a transfer in the current 2025–26 tax year, the election deadline is 31 January 2029. The election deadline is reduced by one year if the shares are disposed of in the year following that in which the business was incorporated.