House selling guide
Capital Gains Tax On A Second Home In Scotland
Capital gains tax is charged on the profit when you sell a property that has not been your main home. Capital gains tax is a UK wide tax, so the rules are the same in Scotland as elsewhere in the UK, even though property transaction tax is devolved. Any tax due on UK residential property must be reported and paid to HMRC within 60 days of completion.
Written for sellers in Scotland
Second homes, buy to lets and inherited houses are all outside the relief that protects your main residence, so the increase in value between what the property cost you and what you sell it for can be taxable.
This guide explains how the gain is worked out, what you are allowed to deduct, the reliefs worth knowing about, and the reporting deadline that catches most people out.
It is a UK tax, not a Scottish one
Land and Buildings Transaction Tax and the Additional Dwelling Supplement are devolved and specific to Scotland, which is why buyers here pay different purchase taxes. Capital gains tax is not devolved: it is set by HMRC and applies across the UK.
So a landlord in Glasgow and a landlord in Manchester follow the same capital gains rules, rates and deadlines.
How the gain is calculated
The gain is the sale price minus what the property cost you, minus the costs of buying and selling, minus qualifying improvement spending. Your annual exempt amount is then deducted, and the balance is taxed.
For an inherited property, the cost is the value at the date of death rather than what the deceased originally paid, which is why executors need that valuation in writing.
- Deductible: purchase price, LBTT paid on purchase, legal fees, survey fees
- Deductible: estate agent commission and legal fees on the sale
- Deductible: capital improvements such as an extension or a new kitchen where it added value
- Not deductible: mortgage interest, insurance, general repairs and redecoration
Step by step
- 1
Work out your base cost
The purchase price, or for an inherited property the value at the date of death. Add the buying costs you paid at the time.
- 2
Add up the improvements
Capital improvements count, routine maintenance does not. A new extension counts. Repainting and replacing a broken boiler generally do not.
- 3
Deduct your selling costs
Estate agent fees, conveyancing and the Home Report all come off the gain.
- 4
Apply any relief you qualify for
Private residence relief covers periods when the property genuinely was your main home, and lettings relief is now very restricted. Check with an accountant.
- 5
Deduct the annual exempt amount
Each individual has an annual capital gains allowance. Jointly owned property means each owner uses their own.
- 6
Report and pay within 60 days
UK residential property disposals must be reported to HMRC and the tax paid within 60 days of completion, separately from your usual tax return. Late reporting brings penalties.
Situations where the bill is often smaller than expected
Keeping receipts is the practical lesson. People routinely overpay because they cannot evidence work done ten years ago.
- The property was your main home for part of the time you owned it
- It is jointly owned, so two annual exempt amounts apply
- You have capital losses from previous disposals to set against the gain
- It is an inherited property sold soon after death, so the gain over the date of death value is small
- Significant capital improvement spending that you have receipts for
This guide is not tax advice
Rates, allowances and reliefs change, and your position depends on your income, ownership history and whether the property was ever your main home. Speak to an accountant or a tax adviser before you commit to a sale, and check current rates on the HMRC website.
Paperwork to gather before you sell
Your accountant will ask for all of this, and it directly reduces the bill.
- Original purchase price and completion statement
- Date of death valuation if the property was inherited
- Invoices for extensions, conversions and other capital improvements
- Estate agent and solicitor invoices for the sale
- Dates you lived in the property as your main home, if any
- Details of any co owners and their share
- Records of previous capital losses you can offset
- Rental accounts if the property was let
Frequently asked questions
Is capital gains tax different in Scotland?
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No. Capital gains tax is a UK wide tax with the same rules and rates. What differs in Scotland is the tax buyers pay on purchase, which is LBTT plus the Additional Dwelling Supplement on second homes.
Do I pay capital gains tax on an inherited house?
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Not on the value at the date of death, but on any increase between that value and the sale price. Selling soon after death usually keeps that gain small.
When do I have to report and pay?
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Within 60 days of completion for UK residential property. That is a separate report to HMRC, not something that waits for your annual tax return.
Can I avoid it by moving into the property first?
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Private residence relief only covers the period it genuinely was your main home, and HMRC looks closely at short occupations arranged for tax purposes. Take proper advice.
More selling guides
Home Report Scotland
What a Home Report covers, when you need one, and how selling directly removes the cost.
How Long Does It Take to Sell a House in Scotland?
Average timescales for an open-market sale and how a cash sale compares.
Cost of Selling a House in Scotland
Estate agent fees, legal costs, Home Reports and other selling costs explained.
