Capital Gains Tax on Selling a Rental Property: What Landlords Actually Pay

This article explains how the calculation works. It is not tax advice, and what you actually owe depends on your income, your costs and how you hold the property. That is a conversation for an accountant, ideally before you exchange rather than after.

It is the third of three taxes, not a surprise at the end

Property has an entry tax, a running tax and an exit tax. Most people model the first two and discover the third.

Stamp duty is paid on purchase and is not deductible against rental income. It is, however, deductible against a future capital gain.

Income tax applies to rental profit each year while you hold the property.

Capital gains tax applies to the growth in value when you sell.

Modelled together at the outset, none of them is a shock. Modelled separately, the third one arrives at the worst possible moment, which is after you have already agreed a sale price. The entry cost is set out in stamp duty on buy-to-let: what landlords actually pay, and the running cost in tax on rental income: what UK landlords actually pay.

What the gain actually is

The gain is not the difference between what you paid and what you sold for. Several costs come off first.

Deductible from the gain:

• The original purchase price
• Stamp duty paid on the purchase
• Legal and survey fees on the purchase
• Estate agent and legal fees on the sale
• Capital improvements made while you owned it

Not deductible from the gain:

• Repairs and maintenance, which are income tax expenses instead
• Mortgage interest, likewise
• Mortgage arrangement or redemption fees

The repairs versus improvements line matters here as much as it does for income tax. Replacing a broken boiler with an equivalent one is a repair, deductible against rental income. Adding an extension or converting a loft is an improvement, deductible against the eventual gain. The same expenditure cannot count twice.

Keep the invoices. A refurbishment receipt from 2019 is worth real money in 2029, and reconstructing it later is close to impossible.

The rates, and how the band works

For 2026/27, capital gains tax on residential property is charged at:

Residential property rates were aligned with other chargeable assets from 30 October 2024, so there is no longer a separate higher rate applying only to property.

How the rate is decided. The gain is stacked on top of your other taxable income for the year. If your salary already uses your basic rate band, the whole gain is taxed at 24%. If part of the band is unused, that part of the gain is taxed at 18% and the rest at 24%.

The annual exempt amount is £3,000 for individuals for 2026/27, down from £6,000 in 2023/24 and £12,300 in 2022/23. Most trusts get £1,500. Net gains up to the exempt amount are not taxed; only the excess is.

That reduction is why more landlords now have a bill. At £12,300 a modest gain was often covered. At £3,000 it very rarely is.

Source: HMRC Capital Gains Tax rates and allowances, 2026/27. Rates and thresholds are set by legislation and change at fiscal events.

The 60-day rule

This is the single most common expensive mistake, and it is entirely avoidable.

You have 60 days from the completion date to report a UK residential property disposal and pay the tax due, through HMRC's Capital Gains Tax on UK property service. Not through your self assessment return. Not by the following 31 January. Those are separate obligations with separate deadlines.

Complete on 10 September and the deadline is 9 November.

The penalty is immediate. £100 for a late return, with interest and further charges accruing.

Two variations worth knowing. UK residents only need to file where tax is actually due. Non-UK residents must file within 60 days regardless of whether any tax is owed, which trips up overseas landlords who assume a small gain means no paperwork. The wider picture for non-residents is in our guide to UK property investment for British expats.

What it looks like on a real property

Take one of our completed client purchases. LS11, Leeds, bought November 2019 at £89,500 and valued at £160,000 in 2026.

Illustrative calculation, with assumed costs clearly marked:

Tax due, depending on band: roughly £8,987 at 18%, or £11,982 at 24%.

Read the assumptions carefully. The purchase price, the sale value and the stamp duty are real. The legal fees, improvement costs and sale costs are illustrative, because the actual figures vary by property and by solicitor. Your own numbers will differ, and only your invoices and your accountant can produce the real answer.

Purchase price and 2026 valuation from Lifestyle Property Group completed acquisitions. 2026 figure is a desktop valuation. Full methodology and disclaimers on our case studies page. Past performance is not a reliable indicator of future results.

If you hold through a limited company

The mechanics change entirely.

A company does not pay capital gains tax. Gains form part of the company's profits and are charged to corporation tax, reported through the company's CT600 return rather than through the 60-day property service. The annual exempt amount does not apply.

Getting money out of the company afterwards is a separate taxable event, which is the point most comparisons of personal against corporate ownership skip over.

Which structure suits you is not a capital gains question in isolation. It depends on your income, how long you intend to hold, whether you need the proceeds personally, and how many properties you own. That is an accountant's question, and it is better asked before you buy than at the point of sale. The running position is set out in our rental income tax guide.

Two mechanical features of the rules

Stated as facts rather than as suggestions, because how they apply to you depends on your circumstances.

Losses. Capital losses on other chargeable assets can be set against gains in the same tax year, and unused losses can be carried forward.

Joint ownership. Where a property is owned jointly, each owner has their own annual exempt amount and their own basic rate band. Transfers between spouses and civil partners are made on a no-gain, no-loss basis.

Private Residence Relief exempts a property that has been your only or main home throughout your ownership. A property bought purely as a rental will not usually qualify, though partial relief can apply where a property was your home for part of the period. The rules on this are detailed and the outcome is genuinely circumstantial.

Where capital gains tax fits in the decision

It is the exit cost, and its size is a function of how well the investment did. A large capital gains bill means a large gain, which is not the worst problem to have.

What matters is that it is in the model from the beginning, and that the paperwork is not left to chance. The 60-day clock starts at completion, not when you get round to it.

The rates and the exempt amount are set by legislation and change at fiscal events. Check the current position at gov.uk, or with your accountant, when a sale is actually in prospect rather than relying on an article.

We source, refurbish, let and manage the property. Your accountant handles how it is taxed on the way out. Here is how it works, and you can model a purchase in the investment calculator.