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