How Much Capital Gains Tax Do Landlords Pay When Selling?
Landlords pay capital gains tax at 18% on the part of the gain that sits inside their basic rate band and 24% on everything above it, after deducting the £3,000 annual exempt amount. The tax has to be reported and paid within 60 days of completion, not at the next Self Assessment deadline.
Those two rates have applied to residential property since 30 October 2024 and carry through the 2026-27 tax year. On a buy-to-let sold with a £120,000 gain, the difference between getting the deductions right and guessing is usually five figures.
The other thing landlords get wrong is the timing. Your landlord policy has to stay in force until the keys change hands, and the 60-day clock starts the day after that.
Capital gains tax on a rental sale is charged at one rate on the part of the gain inside your basic rate band and a higher rate above it, after the annual exempt amount. The gain is what you sold for less what you paid, your buying and selling costs and any capital improvements, so keep the paperwork for all of them. Reporting and payment fall due within 60 days of completion rather than at the next Self Assessment deadline. Private residence relief can take a slice off the gain if you lived in the property yourself.
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- What cgt rate applies when you sell a rental property?
- How do you work out the gain on a buy-to-let?
- What does the tax come to on a typical sale?
- Can you claim private residence relief on a property you let out?
- When do you have to report and pay the tax?
- How can you cut the cgt bill legitimately?
- Is it different if you hold the property in a company?
- Frequently asked questions (FAQs)
What cgt rate applies when you sell a rental property?
18% or 24%, depending on how much of your basic rate band is left once your income for the year is counted. There is no separate landlord rate and no relief for how long you have owned the property.
The rates and allowances for 2026-27
HMRC’s published capital gains tax rates and annual exempt amounts confirm 18% and 24% for individuals from 6 April 2026, with the annual exempt amount held at £3,000 for a third year running.
That allowance was £6,000 in 2023-24 and £12,300 as recently as 2022-23. Almost every rental sale now produces a taxable gain.
| Who is selling | CGT rate on residential property | Annual exempt amount | Tax on a £50,000 taxable gain |
| Basic rate taxpayer (income up to £50,270) | 18% while the gain stays in band | £3,000 | £9,000 |
| Higher rate taxpayer (£50,271 to £125,140) | 24% | £3,000 | £12,000 |
| Additional rate taxpayer (over £125,140) | 24% | £3,000 | £12,000 |
| Trustees of a settlement | 24% | £1,500 | £12,000 |
| Limited company | Corporation tax at 19% to 25% | None | £9,500 to £12,500 |
Why one sale can be taxed at two rates
The gain is stacked on top of your income for the year, so it can straddle the threshold. If your taxable income is £38,000 you have £12,270 of basic rate band left, and only that slice of the gain is taxed at 18%.
Rental profit, pension drawdown and dividends all use up the band before the gain does. Scottish taxpayers use the UK basic rate band for this calculation, because capital gains tax is not devolved.
Holiday lets no longer get special treatment
The furnished holiday lettings regime ended on 5 April 2025, so an Airbnb or short-let property is now taxed exactly like any other rental on sale.
Business asset disposal relief, rollover relief and gift holdover are no longer available on those disposals. Owners who were relying on a 10% or 14% rate are now looking at 24%.
How do you work out the gain on a buy-to-let?
Take the sale price, strip out the costs of buying and selling, deduct what you originally paid and deduct any documented capital improvements. What is left is the chargeable gain, and the £3,000 allowance comes off that.
What you can deduct from the sale price
The gov.uk guidance on working out your gain allows acquisition costs, enhancement expenditure and disposal costs. Routine maintenance and decorating are excluded.
- Stamp duty land tax paid when you bought the property.
- Solicitor, conveyancer and survey fees on the purchase.
- Estate agent commission, legal fees and the EPC on the sale.
- Extensions, loft conversions, new kitchens and bathrooms fitted for the first time, and structural alterations.
- Central heating, rewiring and double glazing where none existed before.
Mortgage interest, letting agent fees and insurance premiums are not deductible here. Those are revenue costs you claim against rental income instead.
Improvement or repair, and why the difference matters
An improvement adds something that was not there before, while a repair puts back what was. Replacing a broken boiler with a similar boiler is a repair, but installing a heating system in a property that had none is an improvement.
Converting a family house into an HMO is capital expenditure, and so is adding an en suite or a rear extension. Keep the invoices, because HMRC can ask for evidence years later.
What does the tax come to on a typical sale?
A jointly owned house bought for £185,000 in 2013 and sold for £340,000 in 2026 produces a £120,400 gain and a £26,720 tax bill. Splitting the ownership is what keeps it from being higher.
A jointly owned house sold in september 2026
The couple paid £1,850 in stamp duty plus £1,300 in legal and survey fees on purchase, and spent £26,000 on a rear extension and a new bathroom. Selling costs came to £5,450 in agent commission, conveyancing and the EPC.
One owner is a higher rate taxpayer. The other has taxable income of £38,000, leaving £12,270 of basic rate band.
| Step | Figure |
| Sale price | £340,000 |
| Less selling costs (agent, legal, EPC) | £5,450 |
| Less purchase price | £185,000 |
| Less buying costs (stamp duty, legal, survey) | £3,150 |
| Less documented improvements | £26,000 |
| Chargeable gain | £120,400 |
| Each owner’s half share | £60,200 |
| Less annual exempt amount each | £3,000 |
| Taxable gain each | £57,200 |
| Higher rate owner: £57,200 at 24% | £13,728 |
| Basic rate owner: £12,270 at 18% plus £44,930 at 24% | £12,992 |
| Total CGT payable within 60 days | £26,720 |
What the same sale costs in one name
Held solely by the higher rate taxpayer, the whole £120,400 gain gets one £3,000 allowance and is taxed at 24%. That is £28,176, or £1,456 more than the joint position.
The gap widens when both owners have unused basic rate band. Two basic rate owners with £30,000 of headroom each would pay £23,856 on the same gain.
Can you claim private residence relief on a property you let out?
Yes, but only for the period you genuinely lived there as your only or main home, plus the final nine months of ownership. A property you have never occupied gets nothing.
How the relief is apportioned
HMRC’s helpsheet on private residence relief splits the gain by months of ownership. The final nine months always qualify once the property has been your main home at some point.
Take a flat owned for 240 months where you lived in it for 72. Adding the final nine months gives 81 qualifying months out of 240, so 33.75% of the gain is relieved.
On a £120,400 gain that is £40,635 wiped off before the allowance is applied. The extended 36-month final period applies only if you are disabled or move into a care home.
Lettings relief and what is left of it
Lettings relief is capped at the lower of £40,000, the private residence relief already given, or the gain from the letting. Since 6 April 2020 it applies only where you shared the property with your tenant, so a standard let handled through a let property policy does not qualify.
Landlords who moved out and let the whole house lost this relief six years ago. Lodger arrangements where you stayed in occupation are the surviving case.
When do you have to report and pay the tax?
Within 60 days of completion, through HMRC’s Capital Gains Tax on UK Property account. The gain then goes on your Self Assessment return as well, with the 60-day payment credited against the final figure.
The 60-day property return
The rule is set out in the gov.uk guidance on reporting and paying CGT on UK property. UK residents only need to file where there is tax to pay, so a disposal fully covered by relief, losses or the allowance needs no 60-day return.
Non-residents are treated differently and must report every UK property disposal, even at a loss. You will need the completion statement, the original purchase documents and your improvement invoices to complete it.
What missing the deadline costs
Schedule 55 to the Finance Act 2009 sets a £100 penalty the day you are late. At six months a further penalty of £300 or 5% of the tax due applies, whichever is greater, and the same again at twelve months.
Late payment interest runs on top at 7.75%, the rate HMRC has charged since 9 January 2026. On a £26,720 bill left unpaid for six months that is roughly £1,035 in interest before any penalty.
Exchange in march, completion in april
The date of disposal for capital gains tax is the date contracts are exchanged, under section 28 of the Taxation of Chargeable Gains Act 1992. The 60-day reporting clock, however, runs from completion.
Exchange on 30 March 2027 and complete on 12 April 2027 and the gain falls in 2026-27, while the return is not due until June. Landlords who assume the tax year follows completion pay in the wrong year and lose an allowance.
Cover has to hold until completion, whatever the tax position. Keep the buildings section live to the day of the transfer, tell your insurer if the tenant leaves first, and switch to unoccupied property cover once the property has stood empty for 30 to 45 days.
A tenant who stops paying after hearing the property is on the market is a common problem, which is what rent guarantee is for. If your sale collapses you are back to letting it, so compare landlord insurance before you cancel anything.
How can you cut the cgt bill legitimately?
Use both spouses’ allowances and rate bands, claim every improvement you can evidence, and register your capital losses. Those three moves account for most of the tax landlords save.
Transfers between spouses and civil partners
A transfer to a spouse or civil partner you live with is treated as no gain and no loss, so nothing is taxed on the transfer itself. Your partner inherits your original cost, and the gain surfaces when they sell.
Moving half of a property to a basic rate spouse before sale gives you a second £3,000 allowance and can shift part of the gain from 24% to 18%. The transfer has to be done properly and before exchange, not afterwards.
The stamp duty trap on a mortgaged share
Taking on a share of the mortgage counts as chargeable consideration for stamp duty, even though no cash changes hands. Transfer half of a property carrying a £300,000 mortgage and your spouse is treated as paying £150,000.
That sits above the £125,000 residential nil rate band, and the 5% additional property surcharge can apply on top. Check the stamp duty cost before you save the capital gains tax.
Losses, and the four-year window
Losses on shares, crypto or another property are set against gains in the same tax year first, and the gov.uk guidance on capital losses gives you four years from the end of the tax year of disposal to claim one.
An unreported loss is not usable, which catches out landlords who sold at a loss in 2022 and never told HMRC. Brought-forward losses come off after current-year losses and can be preserved rather than wasted against the allowance.
Timing and portfolio disposals
Each disposal is separate, so selling two flats from a block in March and April splits the gains across two tax years and two allowances.
Landlords running a multi-property or portfolio operation can also plan a sale for a year when rental profit is low. Selling in the tax year you retire is often worth thousands.
Is it different if you hold the property in a company?
Yes. Companies pay corporation tax on the gain rather than capital gains tax, at 19% to 25% with no annual exempt amount and no 60-day return.
Corporation tax instead of cgt
The small profits rate of 19% applies below £50,000 of total profit and the main rate of 25% above £250,000, with marginal relief in between. Gains are added to trading and rental profits, so a large disposal can push the whole company into the higher band.
Payment is due nine months and one day after the end of the accounting period, which is far later than the 60 days an individual gets.
What you give up in a company
There is no £3,000 allowance, no private residence relief and no spousal transfer trick. Getting the money out then costs dividend tax or salary on top of the corporation tax already paid.
The insurance also has to be arranged in the company’s name rather than yours, or a claim can fail on insurable interest. Check the policy schedule and cover sections name the company as the insured before you complete.
Frequently Asked Questions (FAQs)
No. You make an allowable capital loss instead, which you can set against other gains in the same year or carry forward once you have reported it to HMRC.
It does not. Taper relief and indexation were withdrawn for individuals years ago, so a property held for 25 years is taxed at the same rate as one held for two.
No. Capital gains tax looks at the price you paid and the price you sold for, so the outstanding loan is irrelevant even if the sale barely clears it.
Your acquisition cost is the probate value at the date of death, not what the deceased originally paid. Any growth since probate is the chargeable gain.
Yes, if you are already in Self Assessment. The gain goes on the capital gains pages and the tax you already paid is credited against the final liability.
No. Rental losses are income losses and carry forward against future rental profits, while only capital losses reduce a capital gain.
The months you occupy it as your main home qualify for private residence relief, as do the final nine months. Short token occupation is challenged by HMRC.
Only where there was no arm’s length purchase, such as a gift, an inherited property or a sale to a connected person at below market value.
No, and a UK resident with no tax to pay does not need to file the 60-day return either. Keep the figures in case HMRC asks.
No. A gift to anyone other than a spouse or civil partner is a disposal at market value, so the tax falls due even though no money has changed hands.
File on time and contact HMRC about a time to pay arrangement. Interest still runs at 7.75%, but you avoid the penalties for a late return.
This guide is general information about capital gains tax for landlords as at September 2026 and is not tax advice. Check your own position with an accountant or a qualified tax adviser before you commit to a sale.