If you are a UK landlord and you have sold — or are thinking about selling — a rental property, the first question you probably have is: how much of my gain goes to HMRC?
The answer has changed significantly over the past few years. CGT rates have increased, the annual exemption has been slashed by more than 75%, letting relief has all but disappeared, and the reporting window has shrunk to just 60 days. Selling a rental property in 2026/27 carries a far heavier tax burden than it did in 2021.
This guide covers everything you need to know as a landlord: the current rates, how the gain is calculated, what reliefs (if any) still apply, the strict 60-day reporting deadline, and — most importantly — legitimate strategies to reduce your bill before you complete the sale.
How Is Capital Gains Tax on Property Calculated?
CGT is charged on the gain you make when you sell or dispose of an asset — not the total sale price. For a rental property, the calculation follows this formula:
Gain = Sale proceeds − original purchase price − allowable costs − capital losses
The gain is added to your other income for the year. If total taxable income (after allowances and reliefs) stays within the basic-rate band (£37,700 for 2026/27), the gain is taxed at 18%. Any gain above that threshold is taxed at 24%.
This means your CGT rate is not determined solely by the size of the gain — it depends on your total income. A landlord earning £30,000 in employment income who makes a £50,000 gain on a property sale would pay:
- 18% on the portion of the gain that fills the remaining basic-rate band (£7,700)
- 24% on the balance (£42,300)
Important: The first £3,000 of gains in 2026/27 is completely tax-free (this is the annual exempt amount, or AEA). Only gains above this threshold are taxable. And unlike income tax, there is no separate personal allowance for CGT — the AEA is a flat deduction from total chargeable gains.
2026/27 CGT Rates for Residential Property
For the 2026/27 tax year (6 April 2026 to 5 April 2027), the rates are:
- Basic-rate taxpayers: 18% on residential property gains
- Higher and additional-rate taxpayers: 24% on all residential property gains
These rates apply specifically to residential property — which includes buy-to-let houses and flats, holiday homes, and any dwelling you do not occupy as your main residence. Gains on other assets (shares, commercial property, business assets) are taxed at 10% and 20%, making residential property the most heavily taxed asset class for CGT purposes.
The current rates reflect the increases introduced from April 2024, when the higher rate rose from 20% to 24% and the basic rate from 10% to 18%. There have been no further changes for 2026/27, but the drastically reduced annual exemption (see below) means many more landlords now face a CGT bill on disposals that would have been fully sheltered just three years ago.
The Annual Exemption: What Changed and Why It Matters
The CGT annual exempt amount has been cut dramatically:
- 2022/23: £12,300
- 2023/24: £6,000
- 2024/25 onwards: £3,000
This 76% reduction over two tax years means a landlord who sold a property in 2022/23 with a gain of £12,000 paid nothing in CGT. The same disposal in 2026/27 would result in a tax charge on £9,000 of the gain — at 18% or 24%, that is £1,620 to £2,160 in extra tax.
The AEA applies to total chargeable gains across all assets in a tax year, not per property. If you sell two properties in the same year, you get one £3,000 allowance to split between both gains.
Planning tip: Spouses and civil partners each have their own £3,000 annual exemption. If you transfer ownership of a property (or a share of it) to your spouse before completion, you effectively double the exemption and may crystallise gains in a lower tax band. See the section on spouse allowance below.
Letting Relief: What Survives?
Letting relief was severely restricted from 6 April 2020. Before that date, landlords who let out a property that had previously been their main residence could claim relief on gains of up to £40,000 (£80,000 for jointly-owned property).
Since April 2020, letting relief is only available if the landlord is in shared occupancy with the tenant — meaning you live in the same property as your tenant and share living accommodation (like a live-in landlord). This is a very narrow situation. Standard buy-to-let landlords who rent out an entire property to tenants (and live elsewhere) cannot claim letting relief.
The practical effect: for the vast majority of landlords, letting relief is dead. Do not factor it into your CGT planning unless you are a live-in landlord in shared accommodation.
The 60-Day Reporting Rule
Since 6 April 2020, UK residents disposing of residential property must report the gain and pay any CGT due to HMRC within 60 days of completion. This replaced the old system where CGT was reported via the self-assessment tax return at the end of the year.
Key things to know:
- The 60-day clock starts on the completion date (the day ownership transfers and funds change hands), not the exchange date.
- You report via the HMRC “60-day” online service — you will need a Government Gateway user ID and the property details.
- You must estimate the gain and pay the tax within the same 60-day window. Interest accrues on late payments.
- If you have already reported within 60 days, the final figure is reconciled on your self-assessment return.
- You must report even if the gain is within the £3,000 annual exemption — HMRC requires a “nil” return.
- Failure to report or pay on time carries penalties (initial £100, then daily penalties, then up to 100% of the tax due in serious cases).
Common mistake: Many landlords assume they can wait until the January self-assessment deadline to report and pay. For property disposals completed after 6 April 2020, this is wrong. The 60-day requirement is a separate, earlier deadline. You must report both within 60 days and on your self-assessment return — the SA return reconciles the earlier payment rather than replacing it.
Allowable Costs: What You Can Deduct
One of the most effective ways to reduce your CGT bill is to ensure you claim every allowable cost. The list includes:
Acquisition Costs (Deductible)
- Original purchase price
- Stamp Duty Land Tax (SDLT) paid at purchase
- Legal fees and conveyancing costs on purchase
- Survey costs and valuation fees at the time of purchase
- Estate agent fees for purchasing (if applicable)
Enhancement Costs (Deductible)
- Capital improvements that add value to the property, such as an extension, loft conversion, new kitchen, new bathroom, rewiring, new roof, central heating installation, or landscaping
- Planning permission costs for an enhancement project
- Architect and structural engineer fees for improvement works
Routine repairs and maintenance — like fixing a leaky tap, repainting, or replacing a broken window — are not allowable for CGT purposes. These are revenue expenses deductible against rental income instead.
Disposal Costs (Deductible)
- Estate agent fees and commission on the sale
- Legal fees and conveyancing costs on the sale
- Energy Performance Certificate (EPC) costs
- Capital gains tax itself is not deductible.
Capital Losses (Deductible)
If you have made a capital loss on another asset in the same tax year, you can offset it against the gain from your property sale. If total losses exceed total gains in the current year, the unused loss can be carried forward indefinitely to offset future gains.
You must report capital losses to HMRC within four years of the end of the tax year in which they arose. Unreported losses may not be allowable.
Using Your Spouse’s Allowance
Spouses and civil partners can transfer assets between themselves without triggering a CGT charge (the transfer is treated as a no-gain/no-disposal event). This is one of the most powerful planning tools available to married landlords.
The strategy works like this:
- Transfer a share of the property to your spouse before the sale completes. If your spouse pays tax at a lower rate, the gain attributed to them is taxed at their rate, not yours.
- Double the annual exemption. Each spouse has their own £3,000 AEA. By owning the property jointly (as beneficial joint tenants or tenants in common), you shelter £6,000 of gain between you — double what a sole owner would get.
- Access two sets of basic-rate bands. If both spouses have unused basic-rate band, more of the gain is taxed at 18% rather than 24%.
There is no time limit on how long your spouse must hold the property before the sale — the transfer and sale can happen on the same day. However, anti-avoidance rules apply if the arrangement has no commercial purpose other than tax avoidance. In practice, joint beneficial ownership of a marital home or jointly-purchased rental property is standard and widely accepted by HMRC.
Important: This strategy works for married couples and civil partners only. Transfers to unmarried partners are disposals for CGT purposes and will crystallise a gain at the point of transfer.
Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) applies a reduced CGT rate of 10% on qualifying gains, up to a lifetime limit of £1 million.
Can landlords use BADR? Only in specific circumstances. Standard residential buy-to-let properties do not qualify because letting residential property is treated as an investment activity, not a trading business.
However, BADR may apply if:
- The property qualifies as a furnished holiday letting (FHL) and meets HMRC’s trading conditions (available for let 210+ days per year, actually let 105+ days, not let long-term).
- Commercial property used in a landlord’s trading business (e.g., a workshop let as part of an active trade).
- Land held as trading stock by a property developer (though this is not “landlord” activity in the traditional sense).
If you own a furnished holiday letting and are considering selling, BADR can cut your CGT rate from 24% to 10% — a saving of £14,000 per £100,000 of gain. This is a significant planning opportunity that is worth exploring with a qualified adviser.
Reducing Your CGT Bill: Practical Strategies
Here are the most effective legitimate strategies for landlords looking to minimise CGT on a property sale:
1. Time the sale across two tax years
If you can, exchange and complete in separate tax years. Since the AEA resets each April, you could use the £3,000 exemption in one year and your spouse’s £3,000 exemption in the next. This works best if you delay completion until after 6 April.
2. Use pension contributions to extend the basic-rate band
Personal pension contributions extend your basic-rate band by the gross amount of the contribution. If your gain would otherwise be taxed at 24%, a pension contribution effectively shields the corresponding amount of gain at 18% — while also building retirement savings with the tax relief. For a higher-rate taxpayer, this can be highly effective.
3. Gift shares or other assets instead of cash
If the buyer is flexible, consider taking part of the consideration in the form of shares in a company (unlikely in a standard property sale, but relevant for corporate structures). The CGT treatment may differ.
4. Offset capital losses
Review your portfolio for assets that are standing at a loss. Selling a loss-making asset in the same tax year as a gain-making property can neutralise some or all of the gain. Be mindful of the “bed and breakfasting” rules — you cannot repurchase the same asset within 30 days.
5. Principal Private Residence Relief (PPR)
If the property was ever your main residence, you may qualify for PPR relief. The final 9 months of ownership are always treated as deemed occupation (even if you have moved out). If you lived in the property for some years before letting it out, part of the gain is exempt. This is complex and depends on your specific timeline — worth reviewing with a tax adviser.
6. Transfer to spouse for tax-rate arbitrage
As discussed above, ensure both spouses’ tax bands and exemptions are fully utilised. A simple transfer of ownership before completion can save thousands.
Example: A Full CGT Calculation
Let us walk through a realistic example for a landlord selling a buy-to-let property in 2026/27.
Scenario: Sarah bought a rental flat in 2015 for £180,000. She sells it in December 2026 for £300,000. She paid £3,600 in SDLT at purchase, £1,500 in legal fees, and later spent £12,000 on a new kitchen. On sale, she pays £3,000 estate agent fees and £1,200 legal fees. She has a capital loss of £2,000 from a share sale earlier in the year. Her employment income is £45,000.
- Sale proceeds: £300,000
- Minus purchase price: £180,000
- Minus SDLT (acquisition cost): £3,600
- Minus legal fees (purchase): £1,500
- Minus enhancement (new kitchen): £12,000
- Minus estate agent fees (disposal): £3,000
- Minus legal fees (sale): £1,200
- Minus capital loss (share sale): £2,000
Chargeable gain before AEA: £96,700
Minus annual exempt amount (£3,000): £93,700
Sarah’s income of £45,000 uses £37,700 of the basic-rate band, leaving £0 remaining. The full gain falls into the higher-rate band, so the entire £93,700 is taxed at 24%.
CGT bill: £22,488
If Sarah had transferred half the property to her spouse (who has no other income), the gain would be split: £46,850 each. Her spouse would pay 18% on £37,700 (basic-rate band) and 24% on £9,150. The total combined bill would be significantly lower.
Plan Your Sale with Confidence
Our calculators help you model every CGT scenario — 60-day reporting, spouse transfers, pension contributions, and more. Enter your numbers and see exactly what you could save.
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Frequently Asked Questions
Sources
- Capital Gains Tax overview — GOV.UK
- Allowable costs and losses — GOV.UK
- Report and pay Capital Gains Tax — GOV.UK
- CGT rates and allowances — GOV.UK
- Tax when you sell property — GOV.UK