What happens if I sell a second home or buy to let property?

At Towerstone, we provide specialist capital gains accountancy services for landlords and second home owners. We have written this article to explain the Capital Gains Tax implications of selling property, helping you make informed decisions.

From experience, selling a second home or a buy to let property is one of the moments when tax suddenly becomes very real for people. The sale itself often feels straightforward, you instruct an estate agent, agree a price, complete the conveyancing, and the money arrives. Then, often weeks or months later, the realisation hits that HMRC also wants a share, and that the rules are very different from selling your main home.

In my opinion, this is one of the areas of UK tax where assumptions cause the most expensive mistakes. Many people assume Capital Gains Tax works the same way as income tax, or that property is treated generously in all cases. From experience, neither is true.

In this article I am going to explain clearly and practically what happens when you sell a second home or a buy to let property in the UK, how Capital Gains Tax applies, what reliefs may reduce the bill, when and how you must report the sale, and the mistakes I see time and time again. Everything here is grounded in current UK rules and real world practice, particularly the guidance set out by HM Revenue and Customs and information published on GOV.UK.

This is a long and detailed guide by design. In my opinion, property disposals deserve careful planning because once a sale completes, most tax planning opportunities are already gone.

First Things First: This Is Not Like Selling Your Main Home

The most important starting point is this.

Selling a second home or a buy to let property is not covered by the same tax exemptions as selling your main residence.

In most cases:

• Capital Gains Tax will apply

• The rates are higher than for many other assets

• Reporting deadlines are much tighter

• Cash flow can become an issue if you are not prepared

From experience, people who treat a second home sale like a main home sale often get caught out badly.

What Counts as a Second Home or Buy to Let?

For tax purposes, this generally includes:

• A rental property

• A holiday home

• A former home that is no longer your main residence

• A property you bought purely as an investment

It does not matter whether the property was profitable or loss making overall. Capital Gains Tax looks at the gain, not the rental income history.

Capital Gains Tax Applies When You Sell

When you sell a second home or buy to let property, HMRC treats this as a disposal for Capital Gains Tax purposes.

The basic calculation is:

• Sale proceeds

• Less purchase price

• Less allowable costs

• Equals the gain

That gain is then subject to Capital Gains Tax at the applicable rate.

In my opinion, understanding what counts as an allowable cost is just as important as understanding the tax rate.

What Costs Can Be Deducted From the Gain?

From experience, people often underclaim costs or claim the wrong ones.

Allowable costs usually include:

• The original purchase price

• Stamp Duty Land Tax paid on purchase

• Legal fees on purchase and sale

• Estate agent fees

• Capital improvements, such as extensions or structural changes

What you cannot deduct are routine repairs or maintenance, such as repainting or replacing broken items.

In my opinion, keeping invoices and completion statements is essential, because HMRC can and does ask for evidence.

Capital Gains Tax Rates for Property

This is where property differs from most other assets.

For residential property that is not your main home, the Capital Gains Tax rates are higher.

Currently, the rates are:

• 18 percent for gains falling within the basic rate band

• 28 percent for gains falling above the basic rate band

Your income uses up your tax bands first, and the gain then sits on top.

From experience, this means many landlords pay 28 percent on most or all of their gain.

The Annual Capital Gains Tax Allowance

Each individual has an annual Capital Gains Tax allowance.

This allowance:

• Can reduce the taxable gain

• Applies across all assets, not just property

• Cannot be carried forward if unused

From experience, many people forget that if they have already used their allowance on shares or crypto in the same year, there may be little or none left for the property sale.

In my opinion, this is why timing disposals across tax years can be powerful.

Jointly Owned Property

If you own the property jointly, each owner is taxed on their share of the gain.

This means:

• Each owner uses their own CGT allowance

• Each owner applies their own tax rate

• Each owner must report their own gain

From experience, couples often assume one person reports everything, which is incorrect.

Using a Spouse’s Allowance

One of the most effective planning tools for couples is sharing ownership before sale.

Transfers between spouses or civil partners who are living together are usually no gain, no loss.

This means:

• You can transfer part of the property to your spouse before selling

• The gain is split between you

• Two CGT allowances can be used

• Lower tax bands may apply

In my opinion, this is one of the most underused but legitimate CGT planning opportunities, but it must be done before exchange of contracts.

Private Residence Relief: When It Might Still Apply

Even though this is not your main home now, Private Residence Relief may still reduce the gain if the property was your main residence at some point.

Relief is usually available for:

• The period you lived in the property as your main home

• Plus the final period of ownership, subject to current rules

From experience, people often assume that once a property becomes a rental, all relief is lost. That is not always true, but the relief is usually partial, not total.

Lettings Relief: Much More Limited Than It Used to Be

In the past, Lettings Relief significantly reduced gains on former homes that were rented out.

Now, it is far more restricted.

Generally, Lettings Relief only applies where:

• You shared occupation with the tenant

From experience, most modern buy to let landlords do not qualify for Lettings Relief, despite expecting to.

The 60 Day Reporting Rule

This is one of the most important practical changes in recent years.

When you sell a UK residential property and Capital Gains Tax is due, you must:

• Report the gain to HMRC within 60 days of completion

• Pay an estimate of the CGT within the same timeframe

This is done through HMRC’s property reporting service.

From experience, missing this deadline is extremely common and can lead to penalties and interest even if the Self Assessment return is filed correctly later.

This Does Not Replace Self Assessment

Another common misunderstanding.

Even if you report and pay CGT within 60 days:

• You must still include the disposal on your Self Assessment return

• The figures must match or be reconciled

In my opinion, the 60 day report is a payment on account, not the final word.

What If You Make a Loss?

It is possible to make a capital loss on a property sale, particularly if values have fallen or costs were high.

If you make a loss:

• No CGT is payable

• The loss can be carried forward

• The loss should still be reported

From experience, many people do not report losses, which means they cannot be used later when they would be very valuable.

Inherited Buy to Let Property

Selling an inherited property also triggers Capital Gains Tax, but only on the gain since the date of death.

The base cost is usually:

• The probate value at death

From experience, this often results in lower gains than expected, but reporting obligations still apply.

Companies vs Individuals

If the property is owned by a limited company, the tax position is very different.

Companies do not pay Capital Gains Tax.

Instead:

• Gains are subject to Corporation Tax

• There is no CGT allowance

• Different reliefs apply

In my opinion, this is why deciding how to hold property should always be a long term decision.

Cash Flow and Tax Planning

One issue I see frequently is cash flow shock.

The sale completes, funds are used for another purchase or investment, and then the CGT bill arrives.

From experience, setting aside an estimated tax amount as soon as completion happens avoids stress later.

Common Mistakes I See in Practice

Over the years, the same mistakes come up repeatedly:

• Assuming the main residence exemption applies

• Forgetting the 60 day reporting deadline

• Underclaiming allowable costs

• Missing spouse planning opportunities

• Ignoring partial Private Residence Relief

• Not budgeting for the tax

In my opinion, most of these mistakes are avoidable with early advice.

When Professional Advice Is Particularly Valuable

From experience, advice is especially worthwhile where:

• The gain is large

• The property was once your home

• There are periods of mixed use

• Ownership is being changed

• Multiple properties are involved

The cost of advice is usually far smaller than the tax at stake.

Practical Step by Step Summary

From experience, this is the cleanest way to approach a second home or buy to let sale:

• Identify whether CGT applies

• Gather purchase and sale documents

• Calculate the gain accurately

• Apply any reliefs correctly

• Consider spouse ownership before sale

• Report and pay CGT within 60 days

• Include the disposal on your Self Assessment

• Keep all supporting records

Breaking it down like this removes much of the uncertainty.

The Emotional Side of Selling Property

I want to acknowledge something often overlooked.

For many people, property sales are emotional. They may involve former family homes, long held investments, or retirement plans.

From experience, that emotion can cloud tax decisions. In my opinion, separating the emotional decision to sell from the technical tax reporting is essential.

Key Takeaways

So what happens if you sell a second home or buy to let property? In most cases, Capital Gains Tax applies at higher rates than many people expect, reporting deadlines are tight, and reliefs are limited compared to a main home.

From experience, the biggest problems arise when people assume property is treated kindly by the tax system. It often is not. The biggest savings come from planning before contracts are exchanged, understanding reliefs properly, and reporting on time.

If there is one takeaway, it is this: once you have sold a second home or buy to let property, your tax options are largely fixed. The best outcomes come from understanding the rules early and acting deliberately, not from scrambling after completion.

In my opinion, with the right preparation, selling a second home or buy to let does not need to be stressful. Without it, it very often is.

If you would like to explore related Capital Gains Tax guidance, you may find What is Business Asset Disposal Relief and who qualifies and What is the difference between Capital Gains Tax and Income Tax useful. For broader Capital Gains Tax guidance, visit our Capital Gains Tax hub.