FAQ 022 | How Is UK Capital Gains Tax (CGT) Calculated?

Author: SJW Research & Intelligence

Brand: SJW UK Properties

How is UK Capital Gains Tax (CGT) calculated?

This is one of the questions overseas owners care about most when preparing to sell a UK property. Clients often ask: “My property has gone up in value. Do I simply pay tax on the increase?” The answer is no. UK Capital Gains Tax is not calculated as a straightforward sale price less purchase price. Several other factors come into the calculation, so every owner’s final position may be different.

Which costs can affect the calculation?

Under the current UK tax system, and subject to the relevant rules, the calculation of a capital gain may take account of:

 the purchase price of the property;

 the sale price of the property;

 certain qualifying costs incurred on purchase;

 certain qualifying costs incurred on sale;

 qualifying capital improvements;

 other items that may be taken into account under UK tax law.

The calculation is therefore usually more involved than clients expect.

Can ordinary repair costs be deducted?

This question comes up very frequently. Clients often ask whether all the money spent on renovating a property can be deducted. It cannot. The UK tax system generally distinguishes between:

 repairs and maintenance;

 capital improvements.

The two are treated differently for tax purposes. We therefore recommend keeping the relevant invoices and records, and consulting a professional tax adviser before selling.

Why keeping purchase and improvement records matters

Since 2015 we have seen clients hold a property for ten or fifteen years, only to find at the point of sale that a great deal of the paperwork has been lost: legal fees, survey fees, purchase documentation, works contracts, invoices and payment records. All of these may be relevant when the tax position is calculated. We therefore always encourage clients to build a property file from the very first day of ownership.

Is the calculation the same for company and personal ownership?

Not necessarily. Personal ownership and company ownership sit within two different tax regimes, so the treatment on a sale may also differ. The position should be assessed against the UK tax rules in force at the time of the transaction and the client’s own circumstances. In business since 2015: the tax outcome is rarely decided on the day of the sale Since 2015 we have become increasingly convinced of this. Many clients treat Capital Gains Tax as something to think about on the day they sell. In reality, much of the outcome has already been shaped on the day they bought: whether complete records were kept, whether the right ownership structure was put in place, whether tax planning was done in advance. Each of these decisions may affect the overall tax position on a future sale.

SJW Practical Tip

Based on our experience at SJW UK Properties since 2015, we recommend that clients keep a property file of their own, holding the following documents for the long term:

 the completion statement;

 the Stamp Duty payment record;

 legal fees;

 the survey report;

 works contracts;

 invoices for works carried out;

 records of significant repairs;

 the mortgage offer;

 annual lettings records, where applicable.

Clients often assume these papers will be of no use a few years later. In practice, they frequently prove important when the property is sold.

SJW Insight

Since 2015 we have become increasingly convinced that professional property investment does not mean being well advised at the point of purchase alone. It means maintaining the same standard through buying, holding, letting, borrowing and selling. At SJW UK Properties we therefore always encourage clients not to think of Capital Gains Tax as a bill that arrives when a property is sold. It is closer to a summing-up of the whole investment. Good habits formed today shape the outcome many years from now.

Last updated: July 2026

Disclaimer: This article is provided for general information only and does not constitute legal, tax, accounting or investment advice. UK Capital Gains Tax rules may change as legislation changes, and circumstances differ from client to client. Please rely on the policy in force at the time of the transaction and the advice of a professional tax adviser.