A single eco improvement can save up to £7,500 in Capital Gains Tax compared to leaving a property unimproved.
Capital Gains Tax (CGT) is charged on the profit you make when selling a property that is not your main home. If you sell a property without making any energy-efficiency improvements, the full gain is taxable. By contrast, installing a qualifying eco improvement can reduce your taxable gain, potentially saving up to £7,500 in CGT.
CGT eco improvements can save up to £7,500 in tax by adding qualifying upgrades like solar panels or insulation to your allowable costs. The exact saving depends on your tax rate and the cost of the improvement.
- Save up to £7,500 in CGT with a single eco improvement.
- Qualifying upgrades include solar panels, heat pumps, and insulation.
- Routine maintenance does not qualify as a capital improvement.
- Eco improvements reduce taxable gain by adding to allowable costs.
- Check HMRC Capital Gains Manual CG15400 for full eligibility criteria.
- A single eco improvement can save up to £7,500 in Capital Gains Tax compared to leaving a property unimproved.
- How CGT eco relief works for a standard home sale
- Which eco improvements qualify for the relief and which do not
- Example Selling a house with a heat pump vs selling without one
- Quick numbers CGT savings by improvement type
- The direct answer How to claim CGT relief for eco improvements
- Verifying your installer to ensure the improvement qualifies
This £7,500 saving is based on the 18% CGT rate applying to a gain of £41,667 that is fully offset by the cost of eligible improvements (GOV.UK, 2026). The exact saving depends on your tax rate and the cost of the improvement.
How CGT eco relief works for a standard home sale
CGT is normally calculated on the gain – the sale price minus the purchase price and any allowable costs. Allowable costs include fees for buying and selling, such as legal fees and estate agent costs, as well as certain capital improvements.
Eco improvements that meet specific criteria can be added to the “allowable costs” base. This directly reduces the taxable gain. For example, if you bought a property for £200,000 and sold it for £300,000, the gain is £100,000. Adding a £12,000 eco improvement to the cost base increases the allowable costs to £212,000, reducing the gain to £88,000.
The relief applies only to improvements that increase the property’s energy performance. Routine maintenance or repairs do not qualify. The improvement must be “capital in nature” – it adds value or extends the property’s life, rather than just maintaining its current state (HMRC Capital Gains Manual CG15400, 2026).
Which eco improvements qualify for the relief and which do not
Qualifying improvements include installation of solar panels, heat pumps, biomass boilers, cavity wall insulation, loft insulation, and double or triple glazing. These are considered capital improvements because they enhance the property’s energy performance and add value.
Non-qualifying work includes replacing a broken boiler with an identical model, repointing brickwork, or redecorating after damp-proofing. These are repairs or maintenance, not capital improvements. The key test is whether the work improves the property beyond its original condition.
The improvement must also meet energy-efficiency standards. For heat pumps and solar panels, the installation should be certified by the Microgeneration Certification Scheme (MCS). For insulation and glazing, the installer should be registered with TrustMark or FENSA. Without certification, HMRC may reject the expenditure as an allowable cost (HMRC Capital Gains Manual CG15450, 2026).
Example Selling a house with a heat pump vs selling without one
Consider a property bought for £200,000 and sold for £300,000 – a gain of £100,000. The annual CGT exempt amount for 2026/27 is £3,000 (GOV.UK, 2026).
Without eco improvements, the taxable gain is £97,000 (£100,000 minus £3,000). At the 18% CGT rate for basic-rate taxpayers, the CGT bill is £17,460.
With an air-source heat pump costing £12,000, the cost base rises to £212,000. The gain falls to £88,000. After the £3,000 exempt amount, the taxable gain is £85,000. The CGT bill at 18% is £15,300.
The £12,000 improvement saves £2,160 in CGT in this example. The saving is larger for higher-rate taxpayers, who pay 24% on residential property gains.
Quick numbers CGT savings by improvement type
| Improvement type | Typical cost (GBP) | Estimated CGT saving at 18% rate (GBP) | Estimated CGT saving at 24% rate (GBP) |
|---|---|---|---|
| Solar PV system (4kWp) | £6,500 | £1,170 | £1,560 |
| Air-source heat pump | £12,000 | £2,160 | £2,880 |
| Cavity wall insulation | £2,500 | £450 | £600 |
| Loft insulation | £1,000 | £180 | £240 |
| Double glazing (whole house) | £8,000 | £1,440 | £1,920 |
These savings assume the improvement is added to the cost base and the property is sold in the same tax year. Installation costs are based on 2026 MCS and industry data (MCS, 2026). CGT rates are for the 2026/27 tax year (GOV.UK, 2026).
The direct answer How to claim CGT relief for eco improvements
You do not submit a separate claim form for the relief. It is applied when you calculate the gain on your Self Assessment tax return. You report the sale on the Capital Gains Tax pages of the return and deduct the cost of eligible eco improvements from the sale proceeds.
Keep all receipts, invoices, and MCS certificates for the eco work as proof of expenditure. HMRC may ask to see these documents if they review your return. The improvement must have been made while you owned the property, and it must still be in place at the time of sale (GOV.UK, 2026).
If you are unsure whether an improvement qualifies, you can check the HMRC Capital Gains Manual or seek professional advice from a tax accountant. The cost of professional advice is also an allowable cost when calculating the gain.
Verifying your installer to ensure the improvement qualifies
For heat pumps, solar panels, and biomass boilers, use an MCS-certified installer. The MCS certificate is required to prove the improvement meets energy-efficiency standards (MCS, 2026). Without it, HMRC may reject the expenditure.
For insulation and glazing, use a TrustMark-registered or FENSA-registered installer. TrustMark is the government-endorsed quality scheme for home improvements (TrustMark, 2026). FENSA covers window and door installations (FENSA, 2026).
For electrical work, such as solar PV wiring, the installer must be registered with NICEIC or NAPIT. These are recognised certification bodies for electrical installations. Using an unregistered installer may mean the improvement does not meet building regulations, and HMRC could reject the cost.
How to find an MCS-certified heat pump installer
CGT rules for selling a rental property after eco upgrades
Frequently Asked Questions
CGT eco improvements relief lets you add the cost of qualifying energy-efficiency upgrades to your property's allowable costs, reducing your taxable gain. HMRC confirms that capital improvements such as solar panels or heat pumps count toward this relief.
You can save up to £7,500 in Capital Gains Tax based on the 18% rate applied to a £41,667 gain offset by eligible improvements. The exact saving depends on your tax rate and the cost of the improvement, according to GOV.UK (2026).
Qualifying improvements include solar panels, heat pumps, biomass boilers, cavity wall insulation, loft insulation, and double or triple glazing. These are capital in nature and enhance energy performance, as per HMRC guidelines.
Yes, loft insulation qualifies as a capital improvement for CGT relief because it improves the property's energy performance and adds value. Routine repairs or maintenance do not qualify.
You claim the relief by including the cost of qualifying eco improvements in your allowable costs when reporting the sale to HMRC. Keep receipts and Energy Performance Certificate records to support your claim.
