A second home or holiday home is normally outside private residence relief, so the gain on selling it is chargeable to capital gains tax. For 2026 to 2027, gains above the £3,000 annual exempt amount are taxed at 18% within any unused basic rate band and 24% above it, and a sale of UK residential property with tax to pay must be reported, and the tax paid, within 60 days of completion.

Can a second home ever qualify for private residence relief?

Only if it has at some time been your only or main residence. Section 222 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) relieves a dwelling house that is, or has at any time in your period of ownership been, your only or main residence. The property must first be a residence at all. HMRC’s view, drawn from the case law, is that residence is a matter of quality rather than quantity: a residence is a place where somebody lives, and there is no minimum period of occupation (CG64435). A cottage visited a few weekends a year may struggle to meet that test; one you genuinely live in for part of each week may meet it.

If you have two residences, which one is the main residence is a question of fact unless you nominate. Section 222(5) lets you choose by notice to HMRC within 2 years of a new combination of residences, and you need not nominate the one that is factually your main home (CG64485). The 2 year window restarts each time the combination changes, counting from when a property starts or stops being used as a residence rather than from purchase or sale (CG64495). A nomination can later be varied, with the variation backdated up to 2 years.

How does the nomination tactic work?

Because the final 9 months of ownership always qualify for relief once a property has been your main residence at any time (CG64985), a short nominated period can be valuable. HMRC’s manual describes nominating house A, then varying the nomination to house B and back again shortly afterwards; this secures the final period exemption on house B at the cost of only a small slice of relief on house A (CG64510).

Points to watch:

  • Married couples and civil partners living together can have only one main residence between them, and a notice affecting both must be given by both (section 222(6)).
  • A late nomination is possible under section 222(5A) only where all but one of the residences had a negligible value, for example a rented London flat held on a tenancy alongside an owned house (CG64500).
  • For an overseas home, GOV.UK says you can only nominate it from 6 April 2015 if you lived in it for at least 90 days in the tax year.
  • While a second home is nominated, your other home loses relief for that period, apart from periods that always qualify.

How is the gain calculated?

The gain is broadly the sale price less what you paid. GOV.UK lists deductible costs as the costs of buying, selling and improving the property, such as estate agents’ and solicitors’ fees and improvement works like an extension; normal maintenance such as decorating does not count. Market value replaces the price paid if you received the property as a gift or, where the Inheritance Tax value is not known, an inheritance. If you own jointly, you calculate the gain on your own share.

If the property qualifies for some private residence relief, the exempt fraction is the period of actual or nominated main residence plus the final 9 months, divided by the total period of ownership (HS283). Lettings relief is only available if you lived in the property at the same time as letting part of it; see lettings relief after the 2020 changes.

Are holiday homes treated differently?

No longer. The special furnished holiday lettings rules stopped applying for capital gains purposes from 6 April 2025, so a holiday letting business is no longer treated as a trade (CG73505). That generally removes business asset disposal relief and rollover relief for disposals from that date, subject to transitional rules where a business actually ceased earlier. A holiday cottage you let and sometimes use yourself is now taxed in the same way as any other second property. The transitional detail is in furnished holiday lettings after abolition.

What rate of tax applies?

For 2026 to 2027 the annual exempt amount is £3,000. The gain after that allowance is added to your taxable income: the part that falls within the basic rate band, £37,700 for 2026 to 2027, is taxed at 18% and anything above at 24%. Higher and additional rate taxpayers pay 24% on the whole taxable gain. You can set the annual exempt amount against gains that would be taxed at the highest rate (GOV.UK). More detail is in capital gains tax rates.

Illustration only. Sam bought a holiday flat for £180,000, paid £4,000 in buying costs and spent £20,000 on a new kitchen extension. He sells it in 2026 to 2027 for £300,000 with £5,000 of selling costs. The gain is £300,000 less £209,000, which is £91,000. It was never his main residence, so no private residence relief applies. After the £3,000 annual exempt amount the taxable gain is £88,000. If Sam’s taxable income is £30,000, £7,700 of the gain falls in the basic rate band at 18% (£1,386) and £80,300 at 24% (£19,272), giving tax of £20,658.

How does the 60 day reporting rule work?

Schedule 2 to Finance Act 2019 requires a return and a payment on account by the 60th day after completion of a disposal of UK residential property on which a gain accrues. No return is needed if no payment on account would be due, for example where the gain is covered by the annual exempt amount or losses (paragraph 4). The payment is the tax notionally chargeable for the year at that point, and you may use reasonable estimates where figures are not yet known (paragraphs 7 and 14). Note that the deadline runs from completion, but the date of disposal for working out which tax year applies is exchange of contracts.

GOV.UK says you report through a Capital Gains Tax on UK property account, that interest and a penalty may be charged if you report or pay late, and that if you are registered for Self Assessment you must also include the sale on your tax return. Non residents must report every disposal of UK property even with no tax to pay. A UK resident selling an overseas second home does not use the 60 day service; the gain goes on a Self Assessment return or the real time Capital Gains Tax service. See the 60 day property return for the mechanics.

Can a spouse or partner help reduce the tax?

Each spouse or civil partner has their own annual exempt amount and their own basic rate band. Transfers between spouses living together are at no gain no loss, so moving a share of a second home to a spouse before a sale can spread the gain, provided they genuinely own the share and receive their part of the proceeds. See transfers between spouses and civil partners.

What are the common mistakes?

  • Missing the 2 year nomination window when a second home was bought.
  • Nominating a property that was never a residence in the first place.
  • Deducting repairs and redecoration as if they were improvements.
  • Assuming former holiday let reliefs still apply after 5 April 2025.
  • Counting 60 days from exchange instead of completion, or forgetting to repeat the sale on the Self Assessment return.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.