Capital gains tax when you sell a rental property
If you're selling a buy-to-let, or a home you used to live in and later let out, capital gains tax is usually the biggest bill on the sale, and it lands fast: HMRC wants it within 60 days of completion. This guide covers the rates, the £3,000 allowance, how your income decides which rate you pay, what you can and can't deduct, the reliefs for former homes, joint ownership, losses, and a fully worked example. It's for individuals: companies pay corporation tax on their gains instead. Figures are for the 2026-27 tax year, checked at gov.uk in September 2026.
The numbers that matter (2026-27)
| Item | Figure |
|---|---|
| Tax-free allowance (annual exempt amount) | £3,000 per person |
| Rate on gains inside your basic-rate band | 18% |
| Rate on gains above it | 24% |
| Basic-rate band | £37,700 of taxable income |
| Deadline to report and pay | 60 days from completion |
| Private residence relief, final period | Last 9 months of ownership |
| Letting relief | Only if you lived with your tenants, capped at £40,000 |
The 18% and 24% rates on residential property have applied since 6 April 2024, when the higher rate was cut from 28%. Since 30 October 2024 most other assets are taxed at the same two rates, so property is no longer singled out. The allowance has been £3,000 since April 2024, down from £6,000 in 2023-24.
CGT is UK-wide. Stamp duty differs between England, Scotland and Wales, but capital gains tax does not. The law tells HMRC to work out CGT as if you were not a Scottish or Welsh taxpayer, so a landlord in Glasgow or Cardiff uses the same £37,700 band, rates and allowance as one in Leeds, even though their income tax bands differ.
How your income decides the rate
This is the part most people get wrong. There's no "basic-rate CGT" you get just because your salary is modest. HMRC's method:
- Take your taxable income for the year (income minus your £12,570 personal allowance), including your rental profit.
- Work out your total gains and deduct the £3,000 allowance.
- Stack the gains on top of your income.
- Whatever fits inside the £37,700 basic-rate band is taxed at 18%. The rest is taxed at 24%.
The catch: a large gain eats the band fast. A basic-rate taxpayer with £25,000 of taxable income has only £12,700 of band left. Sell a rental with a £70,000 gain and most of it is taxed at 24%, whatever your job pays.
What you can deduct (and what you can't)
Your gain is the sale price minus what you paid, minus allowable costs. The list of allowable costs is set in law, and it's narrower than people expect.
| You can deduct | You can't deduct |
|---|---|
| Stamp duty you paid when you bought (see the stamp duty guide) | Mortgage interest, ever |
| Solicitor and conveyancing fees, buying and selling | Repairs and maintenance, such as redecorating or a like-for-like boiler |
| Estate agent, surveyor and valuation fees, and advertising | Anything you already claimed against rental income |
| Capital improvements: an extension, a loft conversion, a conservatory | Improvements that are no longer there when you sell |
The rule of thumb: if it went against your rent as a repair, it can't come off your gain too. If it improved the property and wasn't allowable against rent, it probably can. Keep every improvement receipt from the day you buy: the landlord income tax guide explains where the repair line sits.
A worked example
Priya bought a terraced house in 2015 for £150,000, paying £3,500 in stamp duty and legal fees. She let it throughout, added a £12,000 rear extension, and spent £6,000 over the years on a new boiler and redecorating (repairs, already claimed against her rent). She sells in October 2026 for £240,000, paying £4,000 in agent and solicitor fees.
| Line | Amount |
|---|---|
| Sale price | £240,000 |
| Less selling costs | £4,000 |
| Less purchase price | £150,000 |
| Less buying costs | £3,500 |
| Less extension | £12,000 |
| Gain | £70,500 |
| Less annual exempt amount | £3,000 |
| Taxable gain | £67,500 |
The £6,000 of repairs doesn't appear: it was already deducted from her rental income.
Priya's taxable income for 2026-27 (salary plus rental profit, after her personal allowance) is £25,000. That leaves £12,700 of basic-rate band:
- £12,700 at 18% = £2,286
- £54,800 at 24% = £13,152
- Total CGT: £15,438
If she were a higher-rate taxpayer, the whole £67,500 would be taxed at 24%: £16,200. The difference is just £762. On a big gain, being a basic-rate taxpayer barely helps.
She completes on 16 October 2026, so the return and the payment are both due by 15 December 2026.
Owning jointly: two allowances, two bands
Joint owners each work out the gain on their own share and report it themselves. That means two £3,000 allowances and two basic-rate bands.
Same house, owned 50:50 with her husband, who has no taxable income. Each has a gain of £35,250, or £32,250 after the allowance:
- Husband: £32,250 at 18% = £5,805
- Priya: £12,700 at 18% = £2,286, plus £19,550 at 24% = £4,692, total £6,978
- Combined: £12,783, which is £2,655 less than sole ownership
Transfers between spouses and civil partners who live together are free of CGT, so some couples move a share into joint names well before a sale. The catch: it has to be a genuine transfer of ownership, your spouse takes on your original cost, and moving a mortgaged share can have stamp duty and lender consequences. Take advice before, not after.
Former homes: private residence relief
If the property was once your only or main home, you get private residence relief for:
- every period you lived in it as your main home, and
- the last 9 months you owned it, whether or not you lived there then.
The relief is a share of the gain based on time. Tom bought a flat, lived in it for 4 years, then let it for 6 years and sold with a £90,000 gain. He gets relief for 4 years plus the final 9 months: 4.75 out of 10 years, or 47.5%. That's £42,750 relieved, leaving £47,250 chargeable before his allowance.
Married couples and civil partners can only have one main home at a time for this relief.
Letting relief: mostly gone
Before 6 April 2020, letting relief could have knocked up to £40,000 more off Tom's gain. Not any more. For sales since then, it only applies if you lived in the property at the same time as your tenant, for example letting a room while you lived there. It's the lowest of your private residence relief, £40,000, or the gain on the let part. If you moved out and let the whole place, as most accidental landlords did, there is nothing to claim. A lodger sharing your living space doesn't count as letting at all.
Losses
If you sold another property (or shares) at a loss in the same tax year, the loss comes off your gains first, in full, even if that wastes some of your £3,000 allowance. Unused losses carry forward, and in later years they only bring your gains down to the allowance, not below it. You have up to 4 years after the end of the tax year to claim a loss, so report it even when you have no gains to use it against. Losses on sales to family members can only be set against gains on disposals to that same person.
The 60-day return
UK residents selling UK residential property must report and pay any CGT due within 60 days of completion, through HMRC's online Capital Gains Tax on UK property account. You'll need the exchange and completion dates, the prices, your costs and any reliefs. If your gains are within your allowance, you don't need to file it. If you're registered for Self Assessment, the sale also goes on your tax return, where any difference from your 60-day figure is settled. Late reporting or payment brings interest and penalties. Non-residents must report every UK property sale by the deadline, even with no tax to pay.
The catch: you're estimating your rate before the tax year ends. Paying at 18% when your year turns out higher-rate just moves part of the bill to your January return, so estimate your income honestly.
Before you sell, model it with the free capital gains tax calculator. Still deciding whether to sell at all? Is buy-to-let still worth it? runs the other side of the decision.
Mistakes people make
- Missing the 60-day deadline. It runs from completion, not the end of the tax year. Plenty of sellers only find out in January.
- Deducting mortgage interest or repairs. Neither comes off a gain. Interest is excluded by law; repairs belong against rent.
- Losing the improvement receipts. An extension you can't evidence is £12,000 of gain taxed at up to 24%.
- Assuming a modest salary means 18%. The gain itself fills the band. Do the stacking.
- Relying on old letting relief. Since April 2020 it only helps if you lived with your tenants.
- Wasting a spouse's allowance and band. Joint ownership gets two of each; sole ownership gets one.
- Selling two properties in the same tax year when spreading them across two would give you two allowances and two basic-rate bands.
Sources: gov.uk: Capital Gains Tax rates · gov.uk: Capital Gains Tax allowances · gov.uk: Capital Gains Tax rates and allowances, current and previous years · gov.uk: Tax when you sell property, work out your gain · gov.uk: Report and pay Capital Gains Tax on UK property · gov.uk: Tax when you sell your home, Private Residence Relief · gov.uk: If you let out your home · gov.uk: Living away from your home · gov.uk: Capital Gains Tax losses · gov.uk: Gifts to your spouse or charity · HMRC Capital Gains Manual CG15250: incidental costs · HMRC Capital Gains Manual CG64710: lettings relief · legislation.gov.uk: TCGA 1992 section 38, allowable deductions · legislation.gov.uk: TCGA 1992 section 1J, rates for Scottish and Welsh taxpayers
Education, not tax advice. For advice on your position, speak to an accountant or tax adviser.