If you are a landlord selling a rental property in 2026/27, the tax landscape has shifted dramatically. Capital Gains Tax rates on residential property have risen to 24% for higher-rate taxpayers, the annual exempt amount has fallen to just £3,000, and lettings relief — once a valuable relief for landlords — is effectively gone. The result is that many landlords face six-figure CGT bills that could have been substantially reduced just a few years ago.
The surge in landlord selling — often called the "great landlord exit" — has been driven by tax changes, rising interest rates, and tighter regulation. But selling without proper CGT planning is one of the most expensive mistakes a property investor can make. A specialist CGT accountant can identify reliefs you may not know about, structure the sale timing correctly, and ensure your 60-day CGT return is filed accurately and on time.
This guide explains how Capital Gains Tax works on rental property, the key changes affecting landlords, and how our CGT service helps you minimise your tax bill.
Why Landlords Need a CGT Specialist
The days of selling a rental property and simply noting the gain on your tax return are over. Since 2020, the 60-day reporting rule means you must report and pay CGT within 60 days of completion — before the end of the tax year. Get the calculation wrong and you could overpay by thousands or face penalties and interest for underpayment.
Several factors make professional CGT advice essential for landlords:
- Rate increases: CGT on residential property rose from 10%/20% to 18%/24% in 2024, with further increases signalled. Higher-rate taxpayers now pay nearly a quarter of their gain to HMRC.
- Lettings relief abolished: Previously, landlords could claim up to £40,000 of lettings relief per owner. This now only applies if you shared occupation with your tenant — which covers almost no modern buy-to-let landlords.
- Annual exemption eroded: The CGT annual exempt amount has fallen from £12,300 in 2022/23 to £3,000 today. Most landlords will exceed this on a single property sale.
- Complex allowable costs: Enhancement costs, capital allowances, and the interaction with replacement-of-dwelling relief are frequently misunderstood. DIY calculations routinely miss deductible costs.
- Interaction with other taxes: CGT interacts with Stamp Duty Land Tax on reinvestment, inheritance tax on property held in trusts, and corporation tax if the property is held in a company structure.
Even a small mistake in your CGT calculation — or a missed relief — can cost more than the professional fees for a full CGT review.
How Capital Gains Tax Works on Property
CGT on residential property is calculated using a straightforward formula, though the detail matters enormously:
CGT = (Sale Price − Purchase Price − Allowable Costs − Enhancement Costs − PRR − Losses) × Tax Rate
The first £3,000 of total chargeable gains in the tax year is exempt. Gains above this are taxed at 18% for basic-rate taxpayers and 24% for higher-rate and additional-rate taxpayers on residential property.
Allowable costs include:
- Stamp Duty Land Tax paid on purchase
- Legal fees for both purchase and sale
- Estate agent fees on sale
- Surveyor and valuation costs
- Advertising costs for finding a buyer
Enhancement costs include:
- Extensions, loft conversions, and structural alterations
- New kitchens, bathrooms, and heating systems
- Landscaping and garden improvements
- New windows, rewiring, and re-roofing
Note that routine repairs and maintenance are not enhancement costs — those are revenue expenses dealt with through your rental income. Only capital improvements that increase the property's value can be deducted from the gain.
Key Changes Affecting Landlords in 2026/27
CGT Rate Increase
The most significant change is the increase in residential property CGT rates. In the April 2024 Budget, the rate for residential property disposals was raised to 18% (basic rate) and 24% (higher rate), up from 10% and 20% respectively. This represents a 20% increase in the higher-rate CGT bill — a landlord selling a property with a £200,000 gain now pays £48,000 instead of £40,000.
Lettings Relief Abolition
Lettings relief was drastically restricted from April 2020. Previously, landlords who let out a property that had been their main residence could claim relief on the lower of £40,000, the amount of PRR, or the gain attributable to the letting period. The change means that lettings relief now only applies if the landlord shared occupation of the property with the tenant — a rare scenario for most buy-to-let landlords.
60-Day Reporting Rule
Since April 2020, UK residents selling a residential property must report the gain and pay the estimated CGT within 60 days of completion. This applies even if the gain is within the annual exemption. The report is made through HMRC's Capital Gains Tax on Property service. Failure to report on time incurs an initial penalty of £100, with further penalties and interest for continued delay.
Important: The 60-day rule creates a cash-flow trap for many landlords. The CGT payment is due before you receive the sale proceeds from your solicitor, and the return requires a reasonable estimate of your gain, often before all costs are known. Our CGT service ensures you have the calculation ready on day one and the return filed within the window.
Our CGT Service
We provide a comprehensive Capital Gains Tax service for landlords, covering every stage of the property sale process:
CGT Calculation & Reporting
We calculate your chargeable gain using full allowable costs and enhancement expenditure, apply the correct reliefs and exemptions, and produce a detailed computation you can share with your solicitor and HMRC.
60-Day Return Filing
We file the mandatory 60-day CGT return through HMRC's online service, ensuring the estimated tax is calculated correctly and paid within the deadline to avoid penalties and interest.
Lettings Relief Review
While most landlords no longer qualify, there are edge cases where lettings relief may still apply. We review your occupation history to confirm whether any relief is available — including overlapping periods of residence and letting.
Property-by-Property Optimisation
If you own multiple properties, planning the order and timing of sales can reduce your overall CGT bill. We model different disposal sequences to find the most tax-efficient outcome across your portfolio.
Incorporation Advice
Transferring rental properties into a limited company can unlock corporation tax treatment on future gains and provide inheritance tax advantages. We advise on whether incorporation is right for your portfolio and help structure the transfer.
HMRC Disclosure
If you have sold a property in a previous tax year and did not report the gain correctly, we can help make a voluntary disclosure to HMRC. This can reduce penalties and avoid a full HMRC investigation.
CGT Tax Calculator
Use our Dividend Tax Calculator to model the interaction between your dividend income and CGT liabilities — particularly important if you hold property through a limited company. For a comprehensive breakdown of how we calculate tax liabilities and the assumptions we use, see our Methodology page.
While we do not yet offer a dedicated CGT calculator on this site, the calculation methodology follows the same principles used across all our tools: HMRC rate schedules, published annual exemptions, and professionally verified deduction categories. Contact us for a personalised CGT computation tailored to your property sale.
CGT Planning Strategies for Landlords
Even within the current tax regime, several legitimate strategies can reduce your CGT liability on property sales:
Timing of Sale
If you are close to retirement or expect a drop in income, delaying the sale until a tax year when you are a basic-rate taxpayer can halve your CGT rate from 24% to 18%. Even a one-year delay can be worthwhile if your employment income falls. Conversely, if you expect future rate increases (which the government has not ruled out), selling sooner may lock in the current rates.
Using Your Spouse's Allowances
Transfers between spouses or civil partners are tax-free for CGT purposes (no gain/no loss). By transferring part ownership of a rental property to your spouse before sale, you effectively double your available annual exemptions (£3,000 each, so £6,000 total) and may use their lower tax band if they have less income. This strategy must be executed before exchange of contracts — ideally well before — to be effective.
Incorporation Relief
If you hold multiple rental properties, transferring them into a limited company can trigger incorporation relief under TCGA 1992, s 162. This defers the CGT liability by reducing the base cost of the shares received in exchange for the property. While the gain crystallises when you sell the shares, it allows you to restructure your portfolio without an immediate tax bill and may provide long-term savings through corporation tax treatment.
Business Asset Disposal Relief (BADR)
If you qualify as a property developer or trader (rather than an investor), your properties may be treated as trading stock rather than capital assets. In this case, the gain may be eligible for BADR (formerly Entrepreneurs' Relief), taxed at 10% on the first £1 million of qualifying gains. However, this relief does not apply to straightforward buy-to-let landlords — HMRC scrutinises BADR claims on property aggressively, and specialist advice is essential.
Warning: Tax planning strategies must be implemented before exchange of contracts. Once the sale is agreed, most planning options are no longer available. Contact us as early as possible in the sale process to ensure you can take full advantage of available reliefs.
Need a CGT Calculation for Your Property Sale?
Whether you are selling a single buy-to-let or restructuring a portfolio, our property tax specialists can calculate your gain, identify every available relief, and handle the 60-day reporting — ensuring you pay no more CGT than the law requires.
Contact us for a consultation.
Frequently Asked Questions
Sources
- Capital Gains Tax — GOV.UK
- CGT rates and allowances — GOV.UK
- Tax when you sell property — GOV.UK
- Reporting and paying CGT — GOV.UK
- CGT for Landlords — HMRC Guidance