Do you pay tax if you sell your house and don’t buy another?
When selling a house in the UK, many assume that you only pay tax if you don’t reinvest in another property. In reality, the tax position depends on the type of property you’re selling and how it was used, not on whether you buy again afterwards. This guide explains when Capital Gains Tax (CGT) does and doesn’t apply, how the 2025 changes affect sellers, and the different scenarios you might face.
Selling your home does not automatically mean you owe tax, even if you don’t buy another. The key question is whether your property qualifies for Private Residence Relief (PRR).
Most homeowners pay no tax when selling their main residence because:
- The property was their only or main home throughout ownership.
- It wasn’t rented out (other than to a lodger).
- It wasn’t used exclusively for business.
- The grounds are less than 5,000m².
If the property is a second home, buy-to-let, inherited property, or has business use, CGT is likely. From April 2025, the annual allowance falls to £3,000, with rates of 18% for basic-rate taxpayers and 24% for higher/additional-rate taxpayers.
See official guidance: GOV.UK – Tax when you sell your home.
Why most main homes are tax-free
Private Residence Relief is designed to protect people from being taxed on the sale of their primary home. You don’t need to buy another property to qualify.
Example scenario
Alan sold his Manchester home for £350,000, having lived there since 2000. He isn’t planning to buy another property. Because it was always his main residence, PRR covers the gain, so no CGT is due.
Selling a second home or buy-to-let
If you sell a second home or buy-to-let, CGT usually applies because PRR doesn’t cover it. This includes holiday cottages, rental flats, and properties you’ve never lived in.
Your gain is calculated as the difference between the sale price and what you originally paid, minus sale costs (legal fees, stamp duty, agent fees) and certain improvement costs.
Example scenario
Sophie bought a flat in Brighton for £150,000 in 2010 and sells it in 2025 for £250,000. With £5,000 in costs and a £3,000 allowance, her taxable gain is £92,000. As a higher-rate taxpayer, she owes £22,080 in CGT at 24%.
Renting part of your home
Letting can change both your income tax and CGT position.
Rental income must be declared, but schemes like the Property Allowance (£1,000) or Rent a Room scheme (£7,500) may reduce liability.
For CGT, if part of the home was rented out (other than a lodger’s room), that portion may not qualify for PRR when you sell.
Example scenario
Claire rented out a self-contained basement flat in her home. When she sold, PRR only covered the part she lived in, so she paid CGT on the portion linked to the rental.
How to calculate your gain
If CGT applies, the formula is:
Sale price – (purchase price + buying/selling costs + improvement costs)
Costs that reduce your gain include stamp duty, legal fees, estate agent fees, and structural improvements like an extension. Decorating and routine maintenance do not count.
Use HMRC’s calculator: Work out your Capital Gains Tax on property.
The 2025 rules at a glance
From April 2025:
- Annual allowance: £3,000 per person (£6,000 for couples).
- Rates: 18% (basic-rate taxpayers), 24% (higher/additional-rate taxpayers).
- Deadline: Report and pay CGT within 60 days of completion.
Worked example
A buy-to-let was purchased for £200,000 and sold for £300,000 with £10,000 in costs. Taxable gain: £87,000. A higher-rate taxpayer pays £20,880 in CGT.
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Real-life example scenarios
- Emma downsizing: Emma sold her £500,000 family home in Bath, lived in since 1998. She moved into rented accommodation instead of buying again. Because PRR applied, she paid no tax.
- James selling a buy-to-let: James sold his London flat, never lived in it, and made a £120,000 gain. After deducting his allowance and costs, he paid around £27,000 in CGT.
- Nadia’s inherited property: Nadia inherited her father’s house worth £180,000. She sold it later for £240,000. CGT applied to the £60,000 increase since inheritance.
FAQs
Do I still get Private Residence Relief if I don’t buy another home?
Yes. PRR depends on how you used the property you sold, not whether you reinvest in another.
What if I sell a second home?
Selling a second home usually triggers CGT. You’ll owe tax on the gain, minus your annual allowance and sale costs.
Does letting part of my home affect CGT?
Yes. If you rent out a section as self-contained accommodation, PRR may only apply to the part you lived in. Lodgers don’t normally affect the relief.
Can I reduce my CGT bill?
Yes. Options include transferring ownership to a spouse, offsetting other losses, selling across tax years, and deducting eligible improvement costs.
Do I need to declare the sale of my main home to HMRC?
No, not if it qualifies fully for PRR. If CGT might apply, you must report and pay within 60 days of completion.
Recap: Do I pay tax if I sell my house and don’t buy another?
- Selling your main home is tax-free under PRR, regardless of whether you buy again.
- Second homes, rentals, and inherited houses usually attract CGT.
- From April 2025, reduced allowances mean more sellers will fall into scope.
- Always keep sale and improvement records, and check your liability with HMRC’s calculator.
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