Selling or giving away a second home: the tax to plan for
A second home that has risen in value can produce a large capital gains tax bill when it is sold or given away. Most of the planning has to happen before exchange, and HMRC expects the tax within 60 days of completion.
By Andy Jackson, Head of Accountancy
Updated 26 October 2026
5 min read
Key takeaways
- A second home does not qualify for main home relief unless it has been your main residence for part of the time you owned it.
- Couples who own two homes can choose which one is treated as their main residence, usually within two years of buying the second.
- Where tax is due, the gain must be reported and the tax paid within 60 days of completion.
- Giving the property to your children is a disposal at market value for capital gains tax, and is only effective for inheritance tax if you stop using it.
Working out the gain
The gain is the sale price, less the original purchase price and allowable costs. Allowable costs include stamp duty and legal fees on the purchase, estate agent and legal fees on the sale, and the cost of improvements such as an extension. Routine repairs and redecoration are not allowable.
If you inherited the property, your starting cost is its probate value. If you were given it, your starting cost is its market value at the date of the gift. Keep completion statements and invoices for improvements, because HMRC may ask for them.
Choosing your main residence
If you have two homes that you live in, you can nominate which one counts as your main residence for private residence relief. The election must normally be made within two years of the date you start to have two residences. A married couple or civil partners living together can only have one main residence between them, so they make the election jointly.
A nomination can be varied later. Nominating the second home for a short period before switching back can give relief for the final nine months of ownership on that property, which are always exempt for a home that has been your main residence at some point. This needs to be planned with care and backed by genuine occupation of both homes.
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Rates and the 60-day return
Gains are taxed at 18% within your basic-rate band and 24% above it, after the £3,000 annual exemption. If you own the property jointly with your spouse or civil partner, each of you is taxed on your share and has your own exemption and basic-rate band.
For a UK residential property where tax is due, you must file a return through HMRC's online capital gains tax service and pay an estimate of the tax within 60 days of completion. The gain is then included on your self assessment return for the year, with any difference settled by 31 January. Missing the 60-day deadline brings penalties and interest.
Giving the property to your children
A gift of a second home to anyone other than your spouse or civil partner is treated as a sale at market value. Capital gains tax is due on the increase in value even though no money changes hands.
For inheritance tax, the gift is a potentially exempt transfer: it falls outside your estate if you survive seven years. If you keep using the property more than occasionally, for example for regular family holidays, without paying a full market rent and your share of the costs, the gift is treated as a gift with reservation and the property stays in your estate. Our guide to gifting to children covers the rules.
Other options to compare
- Keeping it until death. No capital gains tax is charged on death and your beneficiaries inherit at the date-of-death value. The property is then part of your estate for inheritance tax.
- Selling in stages. Transferring a share to a spouse before a sale, or selling a share in one tax year and the rest in the next, can use more exemptions and basic-rate bands.
- Gifting into trust. A transfer into a discretionary trust can allow the gain to be held over, unless you, your spouse or your children under 18 can benefit from the trust. The value above your nil-rate band is charged to inheritance tax at 20% on the way in. See our guide to trusts and tax.
The tax on a second home depends on decisions made before exchange of contracts: who owns it, which home is nominated and which tax year the sale falls in. We look at the capital gains tax, inheritance tax and your will together.
Frequently asked questions
Do I pay capital gains tax when I sell a second home?
Yes, on any gain above your £3,000 annual exemption, unless the property qualifies for private residence relief for part of the time you owned it.
How long do I have to pay the tax?
You must report the sale and pay the estimated tax within 60 days of completion.
Can I avoid capital gains tax by giving the property to my children?
No. A gift is treated as a sale at market value, so tax is calculated as if you had sold it.
Can I still use a holiday home after giving it away?
Only occasionally, unless you pay a full market rent and your share of the costs. Regular use without paying means the property is treated as still part of your estate for inheritance tax.
Sources & further reading
This article is general information, not advice. Tax, financial and legal rules change and their effect depends on your circumstances. Check the current position and take professional advice before acting. Last reviewed 26 October 2026. Totus One Limited (company no. 16855798).
Founder of Buzz Accounting, Practice Group and Founder Capital, Andy has built businesses across accountancy, fintech, private equity and e-commerce. He brings the discipline of a COO, the mindset of a founder and the connections of an investor — and a conviction that most businesses aren't broken, they're just leaking time and money.
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