Costs Of Selling A Second Home

Selling a second home is more expensive than selling a primary residence, sometimes substantially so. Capital Gains Tax is the cost that most sellers focus on last, when it should be considered first.

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Key Takeaways

• Capital Gains Tax is typically the highest single cost of selling a second home. Under Finance (No. 2) Act 2024, CGT on residential property is charged at 18% for basic rate taxpayers and 24% for higher rate taxpayers on the gain above the annual exempt amount.
• CGT on UK residential property must be reported and paid to HMRC within 60 days of completion under the reporting regime introduced by the Finance Act 2019 (originally 30 days, extended to 60 days for completions on or after 27 October 2021). Failure to report within this window triggers automatic penalties.
• Private Residence Relief under the Taxation of Chargeable Gains Act 1992 does not apply to a second home that has never been your main residence, but partial relief may be available where you have lived in the property at some point.
• The annual CGT exempt amount is £3,000 for 2024/25, significantly reduced from prior years, meaning smaller gains are now fully taxable where they were previously covered by the exemption.
• Transaction costs, estate agent fees, legal fees, and any mortgage early repayment charge are deductible from the gain for CGT purposes, which reduces the taxable amount.
• The total cost of selling a second home, including CGT, typically amounts to 25 to 35% of the gross gain, depending on the seller’s tax position, making advance planning essential.

Capital Gains Tax: the cost that defines a second home sale

For most second home sellers, Capital Gains Tax is the largest single cost of the transaction, often exceeding estate agent fees, legal costs, and all other expenses combined. It is also the cost that is most frequently underestimated or discovered late. Understanding your CGT position should be the first step in planning a second home sale, not an afterthought once the property is already on the market.

CGT on UK residential property is governed by the Taxation of Chargeable Gains Act 1992 and the annual Finance Acts that set rates and allowances. Under the rates applicable from 6 April 2024, following the Finance (No. 2) Act 2024 changes, CGT on residential property is charged at 18% for gains falling within the basic rate income tax band and 24% for gains falling within the higher rate band. The higher rate replaced the previous 28% rate; the basic rate remained unchanged at 18%.

The taxable gain is calculated as the sale price minus the original purchase price, minus any allowable costs, including improvements made to the property, the costs of purchasing it originally (legal fees, SDLT), and the costs of selling it (estate agent fees, legal fees). The resulting figure, less the annual CGT exemption of £3,000 for 2024/25, is the amount on which CGT is charged.

A worked CGT example:

The following illustrates how CGT is calculated on a typical second-home sale. These are indicative figures. The actual calculation depends on the seller’s specific circumstances, income tax position, and allowable costs.

Illustrative CGT calculation, second home sale

Illustrative example only. Actual Capital Gains Tax will depend on your individual circumstances, tax band, ownership history, and any available reliefs. Figures are based on HMRC’s Capital Gains Tax rates and allowances for the relevant tax year.

Private Residence Relief: does any apply?

Private Residence Relief (PRR) under the Taxation of Chargeable Gains Act 1992 exempts gains on the sale of a property that has been your only or main residence throughout the period of ownership. A second home that has never been your main residence attracts no PRR, and the full gain is taxable.

However, partial PRR may be available where you have at some point lived in the property as your main residence. The calculation is proportional. The gain is apportioned between periods of main residence occupation (which attract relief) and periods of non-qualifying use. Additionally, the final 9 months of ownership always qualify for PRR regardless of use, provided the property was at some point your main residence.

Lettings relief, which previously provided an additional exemption where a property had been let while occupied as a main residence, was significantly restricted from April 2020. It now applies only where the owner was in shared occupancy with the tenant at the time of letting, which dramatically limits its practical application for most second-home sellers who let their property while living elsewhere.

The availability and calculation of PRR are among the most frequently misunderstood aspects of CGT for second-home sellers. Whether you qualify for any partial relief, and how much, depends on the specific dates of occupation, the property’s designation as main residence at different times, and elections made under TCGA 1992. This is not an area for guesswork. Take specialist tax advice before the sale completes, because the CGT position cannot be changed after completion.

The 60-day reporting obligation

Since 27 October 2021, sellers of UK residential property must report the gain and pay any CGT due to HMRC within 60 days of the completion date. This applies even where the seller believes they have no CGT to pay; if the gain is covered by PRR or the annual exempt amount, a return may still be required in some circumstances. The report is made through HMRC’s Report and Pay Capital Gains Tax on UK property service.

Missing the 60-day deadline triggers automatic penalties: an initial fixed penalty of £100 for filing up to six months late, escalating to £300 or 5% of the tax due (whichever is higher) for filing between six and twelve months late. Interest also accrues on unpaid CGT from the 60-day deadline. Your conveyancer can flag the deadline at completion, but the responsibility for filing lies with the seller or their accountant or tax adviser.

At Muve, we flag the 60-day CGT reporting obligation to every second home seller at the point of instruction and again at completion. The most common scenario we see is a seller who was aware of CGT in principle but did not realise that the report and payment are due within 60 days of completion, rather than by the following January self-assessment deadline. The two obligations are separate. CGT on residential property must be reported within 60 days, even if the seller also reports it on their annual self-assessment return.

Transaction costs: what else you pay when selling a second home

Apart from Capital Gains Tax, selling a second home involves many of the same costs as selling any other property. One thing that’s worth knowing is that many of those selling costs can usually be deducted when calculating your Capital Gains Tax, which could help reduce your overall tax bill.

Estate agent fees

Estate agent fees in England and Wales are typically charged as a percentage of the sale price, with the details agreed before the property is marketed. For a standard sole agency instruction, where one agent is appointed exclusively, fees typically range from 1% to 2% plus VAT. Multi-agency arrangements, where two or more agents are instructed simultaneously and the selling agent receives the full fee, are more expensive, typically 2% to 3% plus VAT.

On a £400,000 sale, a sole agency fee of 1.25% plus VAT amounts to approximately £6,000. This is a high cost, but it is also fully deductible for CGT purposes, reducing the taxable gain by the same amount.

Legal fees, conveyancing on a second home sale

The legal process for selling a second home is broadly the same as for any residential sale. Your conveyancer prepares the contract pack, responds to the buyer’s enquiries, manages the transfer of title at HM Land Registry, and handles the redemption of any outstanding mortgage from the sale proceeds. For second homes, there may be additional enquiries relating to the property’s use history, particularly where it has been let, and landlord-specific documentation may be required if the property is leasehold.

Legal fees for a residential sale in England and Wales typically range from £700 to £1,800, depending on the property’s value, complexity, and whether it is freehold or leasehold. These fees are allowable against CGT.

Mortgage early repayment charges

Where the second home is subject to a mortgage and the sale occurs within a fixed-rate period, the lender’s early repayment charge (ERC) applies. ERCs on second home mortgages typically range from 1% to 5% of the outstanding balance. On a £150,000 outstanding mortgage, a 3% ERC is £4,500. The ERC amount should be confirmed with the lender before the property is listed, as it directly affects the net proceeds calculation and the price at which a sale makes financial sense.

ERCs are not allowable as a deduction in the CGT calculation, unlike most other selling costs. This distinction matters for planning purposes.

Energy Performance Certificate

A valid Energy Performance Certificate is required before a property can be marketed for sale in England and Wales under the Energy Performance of Buildings (England and Wales) Regulations 2012. An EPC costs approximately £60 to £120 from an accredited assessor and is valid for 10 years. Where an EPC already exists for the property and is still valid, no new certificate is required.

The full cost picture: a realistic net proceeds calculation

Working out what you will actually receive from selling a second home requires combining all the costs above. The following illustrates the full picture for a typical second-home sale.

Illustrative net proceeds, £400,000 second home sale (higher rate taxpayer)

This illustration shows why calculating net proceeds before deciding to sell is essential. The headline sale price of £400,000 produces net proceeds of approximately £232,000 in this scenario, a difference of £168,000, of which CGT alone accounts for nearly £39,000. The same calculation for a basic-rate taxpayer would show CGT of approximately £29,000, resulting in higher net proceeds but still a substantial tax cost.

Allowable CGT deductions: what you can claim

The following costs are deductible against the gain for CGT purposes, reducing the amount on which tax is charged.

What happens at the conveyancing stage

From a conveyancing perspective, selling a second home involves the same core steps as any sale: contract pack preparation, buyer’s enquiries, exchange, and completion, but with a few additional considerations. Where the property has been let, the seller must provide evidence that any tenancy has ended or that the buyer is aware of and accepts the existing tenancy. The TA6 property information form requires disclosure of any disputes, planning permissions, and the property’s use history. For leasehold second homes, the standard leasehold sale pack is required, including the management information pack from the managing agent, which can add time to the transaction.

The most important conveyancing-specific consideration for a second home seller is timing. Because CGT must be reported and paid within 60 days of completion, the completion date determines when the tax falls due. Where the sale is completing late in the tax year, the seller should be aware that the CGT liability does not wait for the annual self-assessment deadline.

Are you ready to sell your second home?

Here at Muve, we handle second home sales regularly and understand that the transaction is more financially complex than a standard sale. The CGT position needs to be understood before marketing begins, not least because the allowable deductions for sale costs affect the tax calculation, and those costs are determined partly by how the sale is structured. We flag the 60-day reporting obligation at instruction and at completion, coordinate with sellers’ tax advisers where a CGT calculation is being prepared, and handle the conveyancing elements promptly so that the completion timeline does not create unnecessary tax timing complications.

If you are considering selling a second home and want to understand the full financial picture, including what CGT is likely to apply and what your realistic net proceeds look like, speak to your tax adviser and us before you instruct an estate agent. The planning conversations that happen before the property goes on the market are almost always more useful than the ones that happen after an offer is accepted.

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About this article

This article was written by Diana Santos, a legal service and property writer with more than a decade of experience creating educational content for property businesses across the UK. Since joining Muve, she has specialised in UK conveyancing, home buying and selling, and residential property law, researching guidance from organisations including the Council for Licensed Conveyancers (CLC), the Solicitors Regulation Authority (SRA), and HM Land Registry. 

While this article is reviewed periodically to reflect changes in UK conveyancing practice, it is for general information only and does not constitute legal advice.