Capital gains tax when you sell a rental property

Selling an investment property that has grown in value creates a capital gains tax bill, and since the annual exempt amount fell to £3,000 almost every landlord who sells now pays some. This guide explains how the tax is calculated for an individual in the 2026/27 tax year, what reduces it and the deadline that catches people out.

Working out the gain

The gain is the sale price minus:

• the price you paid;
• the costs of buying (stamp duty, legal fees, survey) and selling (agent fees, legal fees, EPC);
• capital improvements that added value: extensions, loft conversions, a new kitchen where there was none, structural work. Repairs, redecoration and like-for-like replacements are not improvements; they were claimable against rent at the time.

Keep evidence for everything. Improvements made twenty years ago still count if you can prove them.

The rates

Each person has an annual exempt amount of £3,000. Gains above that on residential property are taxed at:

• 18% on the part of the gain that fits within your unused basic-rate band, and
• 24% on everything above it.

Your basic-rate band is £37,700 after the personal allowance, and the gain sits on top of your income for the year. A landlord earning £30,000 has around £20,000 of band left and pays 18% on that slice of the gain and 24% on the rest. A higher-rate taxpayer pays 24% on all of it.

Joint owners each have their own allowance and their own band, so a £100,000 gain split between spouses can attract materially less tax than the same gain in one name.

The 60-day deadline

UK residents must report the sale and pay the tax within 60 days of completion using HMRC's Capital Gains Tax on UK property service, and then report it again on the self-assessment return. Miss the 60 days and there are automatic penalties plus interest. Solicitors do not do this for you unless engaged to; put the date in the diary on exchange.

Reliefs that reduce the bill

• Private residence relief: if the property was ever your only or main home, the gain for the period you lived there plus the final nine months is exempt. Lettings relief still exists but only where you shared the home with the tenant, which excludes most landlords.
• Losses: capital losses from other disposals, including in earlier years if reported, offset gains.
• Timing: selling either side of 5 April uses two annual exempt amounts across two properties, and a low-income year can put more of the gain into the 18% band.
• Transfers between spouses are at no gain and no loss, so ownership can be rebalanced before a sale, provided the lender agrees and the transfer is genuine.
• Pension contributions in the year of sale extend the basic-rate band and can pull part of the gain from 24% to 18%.

Companies and non-residents

A company pays corporation tax on the gain rather than CGT, with no annual exempt amount but with indexation for periods before 2018 in some cases. Non-UK residents pay CGT on UK residential property and must file within the same 60 days even where no tax is due.

Before you sell

Run the numbers on the alternatives: refinancing to release equity carries no CGT; transferring to a company crystallises the gain unless incorporation relief applies; selling in stages spreads allowances. For a portfolio landlord the order in which properties are sold, and in which tax years, can change the total bill by tens of thousands of pounds.

Our capital gains tax calculator gives an estimate; a tax adviser should confirm the figure before you commit to a sale. AIRPROP models sale, refinance and restructure options side by side for clients deciding what to do with a property that has done its job.