Key facts
- A second home that is not your nominated main residence does not qualify for full Private Residence Relief.
- CGT on the gain is charged at 18% (basic rate) or 24% (higher rate).
- You may be able to nominate which of two properties is your main residence — but only one at a time.
- The gain must be reported via the 60-day CGT property return and on Self Assessment.
- Consider timing: each spouse has a £3,000 Annual Exempt Amount.
CGT on Second Homes
When you sell a property that is not your only or main residence, the gain is chargeable to CGT. This applies to holiday homes, second homes, inherited properties you have kept, and any other residential property where you have not lived as your main home (or have not nominated it as such).[1]
There is no automatic exemption for second homes. Private Residence Relief only covers your nominated main residence, and you can only have one main residence at a time.
Calculating the Gain
The CGT computation follows the standard rules:
| Step | Detail |
|---|---|
| Disposal proceeds | Sale price |
| Less: acquisition cost | Purchase price + SDLT + legal fees |
| Less: enhancement costs | Extensions, conversions, capital improvements |
| Less: disposal costs | Estate agent fees + solicitor fees |
| = Gain | |
| Less: Annual Exempt Amount | £3,000 (2025/26) |
| Less: capital losses | Current year and brought forward |
| = Taxable gain | At 18% / 24% |
The Nomination Election
If you own two homes and live in both (at least occasionally), you can elect which one is your main residence for PRR purposes. This is known as a “nomination” or “election.”[3]
Key Rules
- You must make the nomination within two years of first owning two qualifying residences
- You can vary the nomination at any time (e.g. switch which property is nominated)
- A property must genuinely be a residence — you must actually live in it occasionally
- Married couples living together can only have one main residence between them
Nomination strategy: Some people nominate their second home for a short period (e.g. 12–18 months) and then switch back. This ensures the second home qualifies for PRR during that period plus the final 9 months of ownership, which can significantly reduce the CGT bill. However, this means the original home does not have PRR for the nominated period — so it only works well if the original home will not be sold soon or if its gain is small.[3]
Worked Example
James and Karen (married) bought a holiday cottage jointly in 2015 for £250,000 (plus £5,000 SDLT and £2,000 legal fees). They spent £20,000 on a new kitchen and bathroom in 2018. They sell in December 2025 for £380,000, paying £6,000 in estate agent fees and £1,500 in solicitor fees. Both are higher-rate taxpayers. No nomination was ever made.
| Step | Amount |
|---|---|
| Sale proceeds | £380,000 |
| Less: acquisition cost | −£257,000 |
| Less: improvements | −£20,000 |
| Less: disposal costs | −£7,500 |
| Total gain | £95,500 |
| James’s share (50%) | £47,750 |
| Less: AEA | −£3,000 |
| Taxable gain | £44,750 |
| CGT at 24% | £10,740 |
Karen’s calculation is identical. Total CGT for the couple: £21,480. By owning jointly, they each use their £3,000 AEA, saving £720 in CGT compared to sole ownership.
Tax Planning Tips
- Joint ownership: If you are married, owning the property jointly allows both spouses to use their AEA
- Timing: If possible, sell across two tax years (exchange in one year, complete in the next) to use the AEA twice
- Losses: If you have capital losses from other disposals, they can offset the property gain
- Improvements: Keep receipts for all capital improvements — they reduce the gain
- Nomination: Consider whether a short nomination period could save tax (but take advice first)
Reporting Requirements
The gain must be reported in two places:[4]
- 60-day CGT property return: File and pay within 60 days of completion
- Self Assessment return: Include the gain on your SA108 capital gains pages, with credit for tax already paid
Frequently Asked Questions
Do I pay CGT when I sell a second home?
Yes. A second home that is not your nominated main residence does not benefit from Private Residence Relief. The gain is subject to CGT at 18% or 24%, depending on your total taxable income. You must report and pay within 60 days of completion.
Can I nominate my second home as my main residence?
Yes, provided you actually live in it at least occasionally. You must nominate within two years of first owning two residences. However, nominating your second home means your first home loses PRR for the period of the nomination, which could increase the overall CGT.
How can I reduce CGT on a second home?
Options include: transferring a share to your spouse to use both Annual Exempt Amounts, timing the sale to use the AEA, offsetting capital losses, claiming all allowable improvement costs, and considering nomination elections if you lived in both properties.
Does the higher rate of stamp duty affect CGT?
The higher rate of SDLT (the additional 5% surcharge for additional residential properties from October 2024) does not directly affect CGT. However, the stamp duty paid on the original purchase is an allowable cost that can be deducted from the gain.
Further Reading
- Private Residence Relief (PRR) — when your home is exempt from CGT
- The 60-Day CGT Property Report — how to report and pay
- CGT When You Sell a Rental Property — buy-to-let disposal rules
- CGT on Inherited Property — selling a property you inherited
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