Landlord Capital Gains Tax UK 2026, Selling a Rental Property

Overview

CGT rates for residential property 2025/26

• Basic rate taxpayers: 18% on residential property gains (from 30 October 2024 Budget, previously 18% was restored from the 2024 Budget reduction to 24%)
• Higher and additional rate taxpayers: 24% on residential property gains (from 30 October 2024 Budget)
• CGT is calculated on the gain, not the sale proceeds. Gain = sale proceeds minus purchase price minus allowable costs
• Annual CGT exempt amount 2025/26: �3,000 (significantly reduced from the pre-2023 level of �12,300). Only the gain above �3,000 is taxable
• Companies pay Corporation Tax on property gains (not CGT), the rate depends on the company's total profits

Calculating the gain, allowable deductions

• Purchase price: the amount you paid for the property (including SDLT paid at purchase)
• Purchase costs: solicitor's fees, survey fees, SDLT paid, and any other costs directly incurred on acquisition
• Improvement costs: capital expenditure that enhanced the property's value, extensions, loft conversions, major refurbishments. Routine repair and maintenance costs are not allowable (they are deductible against rental income instead)
• Disposal costs: estate agent fees, solicitor's fees, and other costs directly incurred on the sale
• Note: mortgage redemption penalties and costs of refinancing are not allowable CGT deductions, they are not costs of the disposal
• Capital allowances: any capital allowances previously claimed on the property (e.g. for furnished holiday let qualifying assets) may reduce the acquisition cost for CGT, take specialist advice if this applies

Private Residence Relief, when it applies

• Private Residence Relief (PRR) exempts from CGT any gain attributable to the period(s) you lived in the property as your only or main residence
• PRR is calculated as: (months of main residence occupation / total months of ownership) � total gain
• The final 9 months of ownership always qualify for PRR, regardless of whether you lived there, this is designed to protect landlords who lived in the property but had to move out before selling
• PRR reduces CGT significantly if you ever lived in the property as your main home, even a short period of owner-occupation creates a PRR entitlement
• If PRR applies, make sure you have records of the period of occupation, utility bills, council tax records, electoral register entries, GP/dentist registration

Lettings Relief, restricted since April 2020

• Lettings Relief reduces the CGT gain on a property that was previously your main home and was then let out
• Since April 2020, Lettings Relief only applies where the landlord was in shared occupancy with the tenant, for example, letting a room in your main home
• Standard landlords (who live separately from their tenants) can no longer claim Lettings Relief, it was abolished for non-shared occupancy lets from April 2020
• If you let rooms in your main home while living there, the relief is the lower of: the PRR amount, �40,000, or the lettable gain attributable to the letting period
• Seek professional advice if you have a complex PRR and Lettings Relief position, the interaction between the two reliefs requires careful calculation

The 60-day reporting obligation

• Since 27 October 2021, landlords must report disposals of UK residential property and pay estimated CGT within 60 days of completion
• Use HMRC's 'Report and pay CGT on UK property' online service, create a CGT on UK property account via GOV.UK
• Pay the estimated CGT within 60 days, if the actual liability is lower (due to losses elsewhere in the tax year), the overpayment is reconciled via self-assessment
• Late filing penalty: �100 for returns filed up to 6 months late, then �300 for up to 12 months late. Daily penalties apply for prolonged non-filing
• The 60-day return is separate from the annual self-assessment return, you must file both: the 60-day return on disposal, and include the disposal in your annual self-assessment