The UK property market is undergoing a significant tax shift following changes announced in the Autumn Statement 2024. Among the most notable are new Capital Gains Tax (CGT) rates and a dramatic cut to the Annual Exempt Amount (AEA).
These changes, effective from 30 October 2024, are already reshaping investment strategies, especially for landlords, second-home owners, and property investors.
This article breaks down what changed, how it affects residential property sales, and what it could cost sellers in 2025 and beyond.
CGT Rate Changes: From 10% & 20% to 18% & 24%
As of 30 October 2024, the main Capital Gains Tax rates for individuals have increased. The former rates—10% for basic-rate taxpayers and 20% for higher-rate taxpayers—have risen to 18% and 24%, respectively, for non-residential assets.
For residential property, the rates remain unchanged: 18% for basic-rate taxpayers and 28% for higher-rate taxpayers.
The increase in non-residential Capital Gains Tax rates came as part of Chancellor’s broader strategy to close the perceived fairness gap between income and capital gains.
According to analysis by MoneyWeek and Financial Times, the move is projected to generate an additional £2 billion in annual revenue by 2027.
This shift aligns Capital Gains Tax more closely with income tax, targeting gains from shares, business sales, and other non-property assets.
While residential property sellers avoid the headline rate hike, they aren’t spared from other key changes.
Residential Property Implications: Buy-to-Let, Second Homes, and More
If you’re selling a buy-to-let property, a second home, or any non-primary residence, CGT applies at higher rates than non-residential assets. These rates remain unchanged from before:
- 18% for basic-rate taxpayers
- 28% for higher-rate taxpayers
However, the sting comes not from the rates themselves, but from the shrinking tax-free allowance and the broader shift in capital gains policy.
As IN-Accountancy and MoneyWeek report, landlords and second-home owners should expect increased tax liabilities even without rate changes.
What’s more, because property gains cannot access Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) or many corporate tax strategies, individuals selling personally held investment properties will feel these changes more acutely than those offloading shares or businesses.
Annual Exempt Amount (AEA) Reduction: Now Just £3,000
Perhaps the most aggressive change is the reduction in the Annual Exempt Amount (AEA)—the threshold under which capital gains are tax-free.
Here’s how the AEA has shrunk in recent years:
| Tax Year | Annual Exempt Amount |
|---|---|
| 2022/23 | £12,300 |
| 2023/24 | £6,000 |
| 2025/26 | £3,000 |
(Source: GOV.UK, Interactive Investor, IN-Accountancy)
This means individuals will now pay Capital Gains Tax on a far greater portion of their capital gains.
For example, a landlord who makes a £50,000 gain in 2025/26 will now be taxed on £47,000 of it, compared to £37,700 in 2022/23.
This reduction amplifies the impact of unchanged or rising rates. In effect, even modest property sales can trigger sizeable CGT bills.
Practical Impact: What It Means in Pounds and Pence
Let’s break this down with real-world scenarios to see how the 2025 Capital Gains Tax rules bite.
Example 1: Basic-Rate Taxpayer Selling a Second Home
- Sale Gain: £50,000
- Annual Exempt Amount: £3,000
- Taxable Gain: £47,000
- CGT Rate: 18%
CGT Owed:
£47,000 × 18% = £8,460
Under 2022/23 rules:
- AEA was £12,300
- Taxable gain: £37,700
- CGT: £6,786
Difference: £1,674 more tax under 2025 rules
Example 2: Higher-Rate Taxpayer Selling Buy-to-Let Property
- Gain: £120,000
- AEA: £3,000
- Taxable Gain: £117,000
- CGT Rate: 28%
CGT Owed:
£117,000 × 28% = £32,760
Under 2022/23 rules:
- AEA: £12,300
- Taxable gain: £107,700
- CGT: £30,156
Difference: £2,604 more tax
Even without a rate change for residential property, the AEA cut makes a significant difference.
Example 3: Non-Residential Asset – Higher-Rate Taxpayer
Let’s say you sell shares in 2025/26:
- Gain: £100,000
- AEA: £3,000
- Taxable Gain: £97,000
- New CGT Rate: 24%
- Old Rate: 20%
New CGT Owed: £23,280
Old CGT Owed: £19,400
Difference: £3,880 more tax
(Source: Clarkwell & Co. Accountants, Interactive Investor)
Who’s Most Affected?
- Landlords offloading property due to rising costs or changing regulations
- Second-home owners selling to cash out or downsize
- Investors in shares and crypto realizing gains over £3,000
- Business sellers who don’t qualify for reliefs like BADR
According to Financial Times and House of Commons Library briefings, these changes disproportionately impact middle-class investors and landlords—not just the ultra-wealthy.
Strategies to Mitigate the Impact
With the new rates and exemptions in place, here are a few legal ways to reduce Capital Gains Tax exposure:
- Time your disposals across tax years (if possible) to make use of two AEAs
- Transfer assets between spouses to double the AEA allowance
- Offset losses from other asset sales to reduce net gain
- Consider using pensions or ISAs for future investments
- Explore ownership via companies, where corporation tax may apply instead of CGT
Clarkwell & Co. Accountants and Blevins Franks both highlight the importance of seeking professional advice, especially for landlords and crypto investors with volatile asset values.
What’s Next?
There’s growing speculation that Capital Gains Tax reforms aren’t over. Some tax experts from MoneyWeek and Financial Times predict further alignment with income tax, especially if future governments continue focusing on “fairness” and wealth redistribution.
A House of Commons Library report notes that CGT now raises just over £17 billion per year, with a sharp upward trend. That makes it a tempting target for Chancellors looking to balance the books without raising headline income tax rates.
Final Thoughts
The UK property Capital Gains Tax surge in 2025 represents more than just a rate change. It’s a recalibration of how the government views investment income, and it’s sending ripples through the property and financial planning sectors.
For those affected, the message is clear: Plan now, not later. Whether you’re a landlord thinking of exiting, an investor sitting on gains, or a couple weighing up selling a second home—understanding the new rules is essential.
Capital gains haven’t been this heavily taxed since the 1980s. But with preparation and strategy, you can still manage the impact and make informed decisions.
