Capital Gains TaxMerranti

CGT on Property Gains: Planning for the 24% Residential Rate in 2025/26

CGT on Property Gains: Planning for the 24% Residential Rate in 2025/26

The 2025/26 tax year brought a subtle but significant change to the taxation of residential property gains. From 6 April 2024, the government reduced the higher rate of Capital Gains Tax (CGT) on disposals of residential property from 28% to 24%. While this was welcomed by many landlords and second-home owners, it raises new questions around timing, ownership, and structuring of disposals.

This article explains what the new rate means, who it applies to, and how to plan efficiently for property disposals in the current tax year — especially when married couples or business owners are involved.

The Current CGT Rates for Residential Property

As of the 2025/26 tax year, the CGT rates for individuals selling residential property are:

  • 18% on gains within the basic rate band
  • 24% on gains above the basic rate band

This is a change from the previous higher rate of 28%, in effect since 2016. The basic rate of 18% remains unchanged.

CGT on other assets — such as shares or commercial property — remains at 10% (basic rate) and 20% (higher/additional rate).

Importantly, companies do not pay CGT but are subject to corporation tax on chargeable gains, which ranges from 19% to 26.5% depending on profit levels.

What Kind of Property Is Affected?

The 24% residential property CGT rate applies to individuals disposing of:

  • Buy-to-let properties
  • Second homes
  • Inherited property not qualifying for main residence relief
  • Former main residences no longer eligible for full Private Residence Relief (PRR)

The change does not affect disposals of:

  • Your only or main residence where full PRR applies
  • Commercial property
  • Gains within pensions or ISAs
  • Company-owned properties (which are subject to corporation tax)

Impact of the Rate Change

Reducing the top rate from 28% to 24% means a taxpayer in the higher rate band could now save up to £4,000 for every £100,000 of taxable gain on a residential property disposal.

For example:

  • A higher-rate taxpayer selling a buy-to-let with a gain of £120,000 (after all deductions and reliefs), previously faced a CGT bill of:
    • £120,000 × 28% = £33,600
  • Under the new rate:
    • £120,000 × 24% = £28,800
  • Tax saving = £4,800

This change rebalances the decision-making process for property investors considering whether to sell, hold, or restructure ownership.

Planning Opportunities

1. Review Your Disposal Timing

If you delayed a property sale waiting for CGT rates to reduce — this is the year to reassess. The 24% rate may now make a disposal more attractive, especially for properties with significant latent gains.

However, if you are already in the basic rate band, the rate was and still is 18% — meaning your personal tax position may determine whether this change makes a difference.

For properties with minimal gains, or where Private Residence Relief still partially applies, the benefit of the reduced rate may be marginal.

2. Use Both Spouses’ Allowances and Rates

If you’re married or in a civil partnership, you can use the “no gain/no loss” rule to transfer a share of a property to your spouse prior to sale. This lets you:

  • Use two CGT annual exemptions (currently £3,000 each)
  • Potentially benefit from a basic rate taxpayer’s lower 18% CGT rate
  • Split gains strategically to reduce the overall tax bill

A well-timed ownership adjustment, done before exchange of contracts, can save several thousand pounds in tax.

3. Offset Losses and Reliefs

You can use capital losses from the same or earlier tax years to offset gains and reduce taxable profit. Losses must be claimed within four years of the tax year they arise.

If you’ve previously sold an asset at a loss — whether shares, cryptoassets, or property — make sure that loss has been declared and is being used to your advantage.

Losses carried forward must be set against gains above the annual exemption.

4. Review Ownership Through Companies

While individuals pay CGT at 18% or 24%, companies pay corporation tax on property gains. Depending on the company’s profit level, this could mean paying tax at:

  • 19% (if total profits are below £50,000)
  • 26.5% (for profits between £50,000 and £250,000)
  • 25%+ on higher gains

In some cases, individual ownership at 24% CGT may now be more efficient than corporate ownership where marginal corporation tax exceeds that. However, this will depend on whether funds are extracted from the company (which may trigger dividend tax) and whether incorporation brings other advantages such as full interest relief.

For landlords considering incorporation, this rate change should factor into the wider analysis — particularly when selling is a likely exit strategy.

60-Day CGT Reporting Still Applies

Regardless of the CGT rate, remember that UK residential property disposals must be reported to HMRC within 60 days of completion.

You must:

  • Report the gain via a UK Property Account
  • Pay any CGT due within 60 days

Failure to do so can result in penalties and interest. This rule applies even if you already file a Self Assessment tax return.

The reporting requirement does not apply if:

  • The gain is fully covered by Private Residence Relief
  • The total gain is covered by losses or the annual exemption
  • The property is located outside the UK (in which case, non-residents have separate rules)

Common Mistakes to Avoid

  • Misjudging the rate: Basic rate band applies after all income — not before. A small amount of rental income or dividends could push you into the 24% band.
  • Missing the 60-day deadline: Don’t wait until the tax return. You must file and pay within 60 days of completion.
  • Assuming joint legal title equals 50:50 CGT split: HMRC looks at beneficial ownership, not legal title. Adjustments require formal declarations before disposal.
  • Forgetting reliefs or allowable costs: Many sellers fail to deduct capital improvements, stamp duty or professional fees from the gain — all of which reduce the taxable amount.

What Next?

For landlords or second-home owners, the new 24% CGT rate creates a window to:

  • Dispose of properties with less tax cost
  • Use joint planning to reduce tax further
  • Reassess incorporation strategy
  • Optimise timing against your wider income profile

As ever with CGT, timing, documentation, and ownership structure make all the difference.

Related Post