Property Disposals
& Capital Gains Tax
Sold a property and didn’t tell HMRC about the gain? This can be put right.
If you sold a rental property or second home at a profit and never reported the Capital Gains Tax (CGT) — or missed the 60-day deadline — you’re not the first, and it’s fixable. This page explains, in plain English, what’s owed and how to put it right.
Already had a letter from HMRC about a sale? Coming forward is still the strong move, but a letter changes the picture — understand exactly what yours means first. See what your letter means →
What Capital Gains Tax on a property actually is
When you sell a property for more than you paid, the profit is called a “gain”, and Capital Gains Tax (CGT) is the tax on that gain — not on the whole sale price, just the profit.
The home you live in is normally free of CGT (a relief called Private Residence Relief). But a rental property or second home usually isn’t — so Capital Gains Tax on a rental property is usually due if you sold one at a profit, and it needs reporting to HMRC.
The gain isn’t just “sale price minus purchase price”. If you’re an ordinary investor selling up (the usual case), you can subtract certain allowable costs first:
- What you originally paid for the property.
- Your buying costs — the Stamp Duty and legal fees.
- Your selling costs — agent and legal fees.
- Money spent improving it (like an extension) — but not ordinary repairs or decorating.
(If you’re a property trader rather than an investor — see below — costs work on a different, business-accounts basis.)
There’s also a small tax-free allowance each year — modest, so it won’t usually wipe out a property gain, but it’s per person, so a property owned jointly (with a spouse, say) gets two allowances, and the gain is split between the owners. All of this is why the real figure is usually lower than people fear, and why it’s worth getting calculated properly.
The 60-day rule — the one that catches people out
Here’s the rule that trips up most landlords. If you sell a UK residential property and there’s a taxable gain, you must report it and pay the Capital Gains Tax within 60 days of completion (the day the sale finishes, not the day you exchange). That’s a separate, faster deadline from the normal once-a-year tax return — and your solicitor doesn’t do it for you.
A lot of people simply don’t know this exists until the 60 days have passed. If that’s you, don’t panic — it’s a very common situation, and it’s exactly what a disclosure puts right.
Two things catch people out here. If you live abroad, you must report every UK property sale within the 60 days — even if there’s no tax to pay, or you made a loss. And if a property was your home for part of the time and let out for the rest, the let part can still be taxable and reportable. If either might be you, it’s worth checking rather than assuming.
One thing worth knowing, calmly: property sales are hard to hide. HMRC receives Land Registry data on every sale and can see when a property changed hands, so an undeclared gain often surfaces sooner or later. That’s not meant to alarm you — it’s the honest reason coming forward first is the sensible move: it’s almost always cheaper and calmer than being found.
Is it really Capital Gains Tax? Investor vs trader
Here’s a distinction that changes everything — and catches a lot of people out. Not every property sale is taxed as a capital gain. It depends on why you had the property:
- If you bought it to let out or hold for the long term, you’re an investor — and a sale is normally Capital Gains Tax (what this page has described).
- If you bought it to do up and sell on — or you buy and sell property as a business — HMRC may treat you as a property trader. Then the profit isn’t a capital gain at all. It’s taxed as business income, which is usually a bigger bill.
HMRC decides which you are using signs called the “badges of trade”. The main ones: your intention when you bought, how often you do it, how long you held it, and how much work you put in. Buy-to-let for years looks like investing; buy-refurbish-flip looks like trading.
And how you own it changes the tax again. In short: how you’re taxed depends on two things — why you had the property (to hold, or to sell on), and how you own it (in your own name, or through a company). Here are the four combinations side by side:
Capital Gains Tax
The gain is taxed as CGT, with the yearly allowance and reliefs like Private Residence Relief potentially available. Often the lighter option for a straightforward sale.
Corporation Tax (on the gain)
The company pays Corporation Tax on the gain. No personal CGT allowance, and it’s the company’s matter, not yours personally.
Income Tax + National Insurance
The profit is business income — taxed as Income Tax, plus Class 4 National Insurance (an extra charge the self-employed pay). No CGT allowance or Private Residence Relief — so often the heaviest on rate. But trading has its own reliefs an investor doesn’t get: a wider range of running costs is deductible, and a loss can be set against your other income. Which is better depends on your circumstances.
Corporation Tax (as trading profit)
The company pays Corporation Tax on the trading profit. Often used by developers because it can be lighter than income tax plus National Insurance.
Putting an undeclared property gain right
Whether you never reported the sale, or missed the 60-day deadline, the way forward is the same: you make a disclosure to HMRC — telling them about the gain and paying the tax, interest and any penalty. Doing this voluntarily, before HMRC contacts you, almost always means a lower penalty than waiting to be found.
For a straightforward investor’s sale, this is something you can do yourself. HMRC has an online service for reporting property gains, and the free tools here help you gather the figures and see where you stand.
Where it gets genuinely tricky — a possible trader question, a company or trust, or several years involved — that’s where a professional is worth it. We’re here if you want one, or if you’d simply rather not do it alone. It’s your call.
The exact route depends on your situation — an individual’s sale, a company’s, or where other undeclared income is involved. It’s worth checking which route fits, or talking it through with us.
To get ready, you’ll want to gather:
- What you sold it for, and the completion date — from your solicitor’s completion statement.
- What you originally paid, plus the buying costs (Stamp Duty, legal fees).
- The costs of selling (agent and legal fees).
- Any genuine improvements that added something new — an extension, an added bathroom, a loft conversion (keep the invoices). The rule of thumb: like-for-like replacements (say, a worn-out kitchen swapped for a similar one) usually count as repairs, not improvements — but a genuine upgrade (a bigger or higher-spec kitchen, say) can qualify. It’s a common grey area, so keep every invoice and get it checked.
- Roughly what other income you had that year (it affects the rate the gain is taxed at — broadly a lower or higher band depending on your income).
The CGT Estimator turns these into an indicative figure to prepare with — a helpful guide, not a final number. Because reliefs and dates can shift the figure a lot, the exact amount is one to confirm with a professional.
How to keep the bill as low as it legitimately can be
The figure people fear is almost always higher than the figure they actually owe — because they haven’t counted the reliefs and costs they’re entitled to. These are the honest ways to work out the right (lower) number:
- Count every cost that reduces the gain. Your purchase price, the Stamp Duty and legal fees when you bought, the agent and legal fees when you sold, and genuine improvements (an extension, a loft conversion) all come off the gain. Dig out old invoices — each one shrinks the tax.
- Two owners, two allowances. The yearly tax-free allowance is per person. A property owned jointly with a spouse or partner is split between you — so two allowances apply, not one, and the gain is halved across you. That alone can save a meaningful sum.
- Did you ever live there? Private Residence Relief. If the property was your own home for a period, that period is normally free of CGT — plus the final 9 months of ownership on top. For a property you lived in before letting out, this can remove a big slice of the gain. It’s one of the most commonly missed reliefs.
- A loss elsewhere isn’t wasted. If you made a loss on another property or asset, it can be set against this gain to reduce the tax. Losses are worth declaring, not forgetting.
- Come forward before HMRC does. As with any disclosure, a voluntary, unprompted approach keeps any penalty as low as possible — far lower than waiting to be found. That saving is entirely in your control.
Doing it yourself: how to report a property gain
For a straightforward sale (an investor selling up), you can do this yourself through HMRC’s online service. Here’s the real shape of it:
- Work out the gain. Sale price, minus what you paid, minus buying and selling costs, minus genuine improvements. Then apply any reliefs — Private Residence Relief if you ever lived there, and your yearly allowance (two allowances if owned jointly).
- Check the deadline that applies. If there’s a taxable gain, you report and pay within 60 days of completion. Non-residents report every sale within 60 days, even at no gain.
- Set up a “UK Property Account” with HMRC. This is the online service specifically for reporting property gains — separate from your normal tax return.
- Report the gain and pay what’s due through that account within the 60 days (or arrange Time to Pay).
- If you’re also in Self Assessment, include the disposal on your annual return too, so the records match up.
The gain that turned out far smaller than feared
Take a landlord we’ll call Ravi (made up, to show how it works). He sold a rental flat and panicked at a £90,000 rise over what he paid — assuming he’d be taxed on all of it.
Then he actually worked it through. He subtracted his buying costs and the fees on both ends, and the £18,000 loft conversion he’d done (invoices found in a drawer). He’d also lived in the flat himself for the first few years, so Private Residence Relief covered that period plus the final nine months. And he owned it jointly with his wife, so what remained was split between them — each using their own yearly allowance.
The outcome: the taxable gain came down to a fraction of the £90,000 he first feared, taxed across two people and two allowances. He reported it properly, on time, and paid a bill that was a world away from his worst-case guess — not through any trick, just by counting everything he was genuinely entitled to.
Illustrative only — figures and people are hypothetical, to show how the reliefs stack up. Your own position depends on your circumstances and should be confirmed with a professional.
In plain English: a quick jargon-buster
New to all this? Here’s what the key terms mean, in the plainest words.
- “Capital Gains Tax” (CGT)
- The tax on the profit when you sell something that’s gone up in value — here, a property. It’s charged on the gain, not the whole sale price.
- A “gain”
- Your profit on the sale — broadly what you sold it for, minus what you paid and the allowable costs. If you sold for less than you paid, that’s a loss, and there’s no CGT.
- “Completion”
- The day the sale legally finishes and the money changes hands — not the earlier “exchange” day. The 60-day clock starts here.
- “Private Residence Relief”
- The relief that normally makes the home you live in free of CGT. It doesn’t usually cover a rental property or second home.
- “A disclosure”
- Telling HMRC about tax you didn’t report before — here, a property gain — and paying what’s owed. That’s all it is: putting the record straight.
- “Investor” vs “property trader”
- An investor buys property to let out or hold long-term — sales are Capital Gains Tax. A property trader buys to do up and sell on (or trades in property as a business) — the profit is taxed as business income, not a capital gain. Which one you are depends mainly on why you bought.
- “Badges of trade”
- The signs HMRC uses to decide if you’re trading rather than investing — things like your intention when you bought, how often you buy and sell, how long you held it, and how much work you did.
- “Income Tax”
- The tax individuals pay on their earnings and business profits. A property trader pays this on their profit, rather than Capital Gains Tax — and it’s usually a higher rate.
- “National Insurance” (Class 4)
- A separate charge on top of Income Tax that the self-employed pay on business profits. A property trader working in their own name usually pays it too; an investor paying Capital Gains Tax does not.
- “Corporation Tax”
- The tax a company pays on its profits or gains — the company equivalent of an individual’s Income Tax or CGT. If you own property through a company, this is what applies instead.
- “Stamp Duty”
- The tax you pay when you buy a property. It counts as one of the buying costs you can subtract when working out a gain.
You’ve got this
An unreported property sale can be put right — and coming forward is the strong, sensible move.
The 60-day rule catches out thousands of people who did nothing wrong except not know about it. It’s a common, fixable situation — and you don’t have to work it all out today. You just have to start.
And the honest bit: doing nothing doesn’t make it go away — the penalty and interest only grow. If HMRC finds the gap before you come forward, it costs more and you have less control. Coming forward first is almost always the cheaper, calmer path.
- You stay in control — you sign, you decide
- Coming forward beats being found
- One step at a time, at your pace
Sold a property and unsure about the tax? Send us the details
A gain is almost always smaller than you fear. There’s no charge to make contact and no obligation.