7 Legal Ways to Reduce CGT on a Property Sale

Reduce CGT on property: why planning matters in 2026/27

Capital Gains Tax on UK residential property is charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers — rates that have increased since 2024. HMRC confirms current CGT rates on its rates page. On a £100,000 gain, the difference between basic and higher rate is £6,000. On a £300,000 gain it is £18,000. The strategies in this article are all legal — they use reliefs and exemptions that Parliament has deliberately written into the tax code.

The Annual Exempt Amount has been cut sharply in recent years — from £12,300 in 2022/23 to just £3,000 in 2026/27. This makes proactive planning more important than ever. A gain that would have been tax-free three years ago now generates a significant bill. Each strategy below is worth knowing before you exchange contracts.

Before diving in, note that all UK residents who sell a residential property at a gain must report and pay within 60 days of completion. Planning must therefore happen before exchange, not after completion. Use our CGT calculator to model your likely gain before you commit to a disposal date.

For an explanation of how CGT on rental property is calculated from first principles — acquisition cost, allowable costs, enhancement expenditure, and the final gain — read our guide to CGT on rental property in the UK.

Strategy 1: time the disposal into a new tax year

The UK tax year runs from 6 April to 5 April. Every individual receives a fresh Annual Exempt Amount at the start of each year. If you have already realised gains that have used up your AEA before the end of a tax year — or if your income in the current year pushes the gain into the higher rate band — delaying completion until after 6 April can make a meaningful difference.

The practical step is to exchange contracts before 5 April if you need the sale locked in commercially, whilst ensuring the completion date falls on or after 6 April. CGT crystallises on the date of completion (not exchange), so the disposal falls into the new tax year for CGT purposes. Check with your conveyancer that this is achievable given the buyer's circumstances.

This strategy is most powerful when you are near the basic-rate/ higher-rate boundary in the current year. If your total income plus gain would push you into the higher-rate band in 2025/26 but your income in 2026/27 is expected to be lower, a one-month delay in completion could cut your rate from 24% to 18% on some or all of the gain.

Always take professional advice before structuring a transaction around a specific completion date — your conveyancer and tax adviser need to coordinate.

Strategy 2: use your Annual Exempt Amount in full

The Annual Exempt Amount for 2026/27 is £3,000. The first £3,000 of net gains each tax year is tax-free for individuals. It sounds modest after the cuts since 2022, but it is still worth £540 of CGT at 18% or £720 at 24%. Over a portfolio of properties sold across multiple years, £3,000 per year per taxpayer (including your spouse) adds up.

The AEA cannot be transferred to a future year. If you do not use it, it is gone. Landlords with multiple properties should consider staggering disposals across tax years to make full use of the AEA each year rather than realising all gains in a single year where the AEA only applies once.

Our CGT calculator automatically deducts the current year's AEA from your net gain, showing your taxable gain after the exemption. It also shows the AEA deduction as a separate line so you can see exactly how much of the threshold you are using.

Seek professional advice to confirm how disposals in the same year interact with your AEA, particularly if you have other gains.

Strategy 3: transfer to a spouse or civil partner before disposal

Under TCGA 1992 s58, transfers of assets between spouses and civil partners who are living together are treated as no-gain, no-loss disposals for CGT purposes. In plain terms: you can transfer all or part of a property to your spouse without triggering a CGT charge, and they inherit your original acquisition cost (the “base cost”) as if they had always owned that share.

When the property is subsequently sold to a third party, your spouse pays CGT on their share of the gain at their own marginal rate, and they use their own £3,000 AEA. If your spouse pays Income Tax at the basic rate (20%) and you are a higher-rate taxpayer, moving ownership to them means the gain on their share is taxed at 18% rather than 24% — a saving of 6% on their portion. They also double the household AEA (£6,000 combined between you).

This strategy must involve a genuine, unconditional gift of ownership. HMRC will scrutinise arrangements where a transfer immediately precedes a sale to an unconnected buyer, particularly if the spouse's share reverts after completion. The transfer should be completed well before exchange, properly documented, and reflected in Land Registry records. Read our detailed guide on CGT and joint ownership of property for the mechanics of partial transfers and their interaction with mortgage lenders.

Spouse transfers have conveyancing, mortgage, and SDLT implications. Always take professional advice before proceeding — the CGT saving may be outweighed by other costs in some circumstances.

Strategy 4: offset capital losses against your gain

Capital losses from any asset — shares, investment funds, cryptocurrency, other properties — can be set against capital gains in the same tax year. If you have investments sitting at a loss and you are planning a property disposal, realising those losses in the same tax year directly reduces the taxable gain on the property.

The ordering rules matter. HMRC confirms that current-year losses must be used in full before prior-year losses are applied. Prior-year losses carried forward only have to reduce the net gain down to the AEA threshold — they do not need to completely eliminate the gain. This means prior-year losses are in some respects more valuable than current-year ones, because you can preserve them to the extent they would reduce a gain to below the AEA.

To claim prior-year losses, you must have reported them to HMRC at the time — either via a Self Assessment tax return or by writing to HMRC. Losses that were not reported in the year they arose may not be accepted. If you have unreported prior-year losses, take advice on whether an amendment is still possible.

Our CGT calculator has a field for entering prior-year losses, which it applies against your property gain in the correct HMRC order before applying the AEA.

CGT loss planning across asset classes requires careful coordination. Take professional advice to ensure losses are applied in the optimal order for your overall tax position.

Strategy 5: document every allowable cost — many sellers miss thousands

The taxable gain on a property disposal is not simply the sale price minus the purchase price. HMRC allows a range of costs to be deducted, and many sellers undercount them — meaning they pay CGT on a larger gain than they should. Every allowable cost reduces your gain pound-for-pound. At a 24% rate, an overlooked £5,000 of costs costs you £1,200 in unnecessary tax.

The allowable costs you should gather before calculating your gain include:

• Stamp Duty Land Tax paid on acquisition (the full amount including any surcharges)
• Solicitor and conveyancing fees on both the purchase and the sale
• Surveyor and valuation fees paid at the time of purchase
• Estate agent fees on the sale
• Capital improvements made during ownership — extensions, loft conversions, new kitchens (where they add value rather than simply replace like-for-like)
• Legal costs of defending title or resolving boundary disputes that were necessary to preserve your ownership

The distinction between a capital improvement and a repair is important. Routine maintenance — redecorating, replacing a broken boiler on a like-for-like basis — is an allowable expense against rental income each year, not a capital cost. Adding a new extension or converting a garage to habitable space is capital expenditure that reduces your CGT gain. HMRC's guidance on working out your gain lists the allowable deductions in full.

Gather invoices, completion statements, and SDLT return receipts from the time of purchase. If you no longer have the original solicitor's file, contact the firm — they are required to retain completion statements for at least six years, and many retain them longer.

Consult a qualified accountant to confirm which expenditure items qualify as capital improvements in your specific case.

Strategy 6: Private Residence Relief nomination

Private Residence Relief (PRR) exempts the portion of a property gain that relates to periods when the property was your main residence. If a property was ever your main home — even briefly — that period is exempt from CGT. Furthermore, the final nine months of ownership are always treated as a period of main residence, even if you had already moved out.

Where you own two properties, you can nominate which one is your main residence for PRR purposes. The nomination must be made within two years of the date you first have two qualifying residences. A well-timed nomination directs the PRR exemption to the property with the higher gain — potentially saving tens of thousands in CGT on the eventual disposal.

The nomination is made by writing to HMRC (your local tax office, or through your self-assessment account). There is no prescribed form — a letter specifying your name, National Insurance number, the addresses of both properties, and the address you are nominating is sufficient. Nominations can subsequently be varied (changed), which gives some flexibility to redirect the relief as your circumstances change.

For worked examples of PRR calculations — including the nine-month deemed period and lettings relief — see our Private Residence Relief guide and calculator. Our CGT calculator also includes a PRR input so you can see the relief applied to your specific gain.

PRR is one of the most valuable CGT reliefs available to property owners but the rules are complex. Take professional advice before making or varying a nomination — a poorly timed change can backfire.

Strategy 7: bed and ISA — capital loss harvesting in the same tax year

If you hold shares, investment funds, or other capital assets outside an ISA that are currently sitting at a loss, you can crystallise those losses by selling them in the same tax year as your property disposal. The losses offset your property gain and reduce your CGT bill. This process is often called “loss harvesting”.

The “bed and ISA” variant goes one step further: after selling the loss-making assets, you immediately rebuy them inside a stocks-and-shares ISA. Future growth on those assets is then sheltered from CGT entirely. The 30-day “bed and breakfasting” anti-avoidance rule (which prevents you from rebying the same asset outside an ISA within 30 days to reset the base cost) does not apply to ISA purchases — so you can sell and rebuy on the same day as long as the repurchase is inside the ISA.

The main constraints are the ISA annual subscription limit (£20,000 per year per adult in 2026/27) and the availability of capital losses in your portfolio. For landlords with a diversified investment portfolio alongside their property, this strategy is worth reviewing before completing a property sale that generates a large gain.

This approach also has an income tax benefit: assets rebought inside an ISA generate dividends free of income tax, reducing future tax liabilities as well as CGT exposure.

Loss harvesting and ISA contributions require careful sequencing and awareness of the anti-avoidance rules. Consult a qualified financial adviser or tax adviser before executing this strategy.

Combining strategies: a worked example

The seven strategies above are not mutually exclusive. A landlord selling a buy-to-let might reasonably apply several of them to the same disposal. Consider the following illustrative scenario — figures are approximate and for illustration only.

Without any planning — same gain, single owner, 24% rate, no reliefs beyond the AEA — the CGT bill on a £132,000 gain would be approximately £30,960 (after a single £3,000 AEA). Planning across multiple strategies roughly halved the combined liability in this illustration. All figures are for illustration only; your actual position will depend on your specific circumstances.

Use the CGT calculator to run your own figures. The Pro Report models disposal date optimisation and spouse transfer scenarios side by side.

What to do before you exchange contracts

CGT planning must happen before you commit to a sale. Once you have exchanged contracts, the disposal is legally fixed and most structural planning options close. The checklist below summarises the key actions.

1. Estimate your gross gain using purchase price, sale price, and allowable costs — the CGT calculator does this in under two minutes.
2. Check whether the property was ever your main home and, if so, calculate your PRR entitlement.
3. Review your income for the current and next tax year to determine whether crossing the tax year boundary would reduce your rate.
4. Discuss with your spouse or civil partner whether a partial transfer makes sense given their income and rate.
5. Review your investment portfolio for unrealised losses that could be harvested in the same tax year.
6. Gather all purchase documentation: completion statement, SDLT receipts, solicitor invoices, and records of capital improvements.
7. Speak to a qualified accountant or CGT specialist before exchanging contracts. The cost of advice is itself an allowable cost against the gain.
8. Set a reminder for the 60-day reporting and payment deadline from the date of completion.

Frequently asked questions