Landlord Capital Gains Tax UK 2026 — Selling a Rental Property

Capital Gains Tax on residential property has become significantly more complex over the past decade. The annual exempt amount has been cut from £12,300 to £3,000, the 60-day reporting obligation was introduced in 2021, and Private Residence Relief — once a powerful tool for landlords who lived in their rental properties — has been restricted. Most landlords selling a buy-to-let property will now face a meaningful CGT charge.

Planning before the sale — including timing the disposal, maximising allowable deductions, and considering Private Residence Relief where applicable — can significantly reduce the tax bill. This guide covers the key rules and practical steps for selling a rental property in 2026.

CGT rates for residential property 2025/26

Residential property gains are taxed at higher rates than other assets:

Basic rate taxpayers: 18% on residential property gains
Higher rate taxpayers: 24% on residential property gains
Additional rate taxpayers: also 24% — there is no additional rate band for CGT
Annual CGT exempt amount: £3,000 (2025/26). Only the gain above £3,000 is taxable
Companies: pay Corporation Tax on property gains at the standard CT rate (19–25%), not CGT — different rules apply
The taxable gain is added to other income when determining which rate applies — if your total income plus gain pushes you into the higher rate band, the gain is split between the basic and higher rates

Calculating the gain — what to include and exclude

The CGT gain is the sale proceeds minus all allowable costs:

Acquisition costs: Purchase price, SDLT paid, solicitor's fees, survey fees, and any other costs directly incurred on acquisition
Improvement costs: Capital expenditure that enhanced the property's value — extensions, loft conversions, major refurbishments, new kitchens/bathrooms that upgrade rather than replace like-for-like
Disposal costs: Estate agent fees, solicitor's fees, and other costs directly incurred on the sale
Not allowable: Routine repairs and maintenance (these are deducted from rental income, not CGT), mortgage redemption costs, refinancing costs, interest costs
Keep records of all acquisition and improvement costs throughout the period of ownership — you will need these when you sell, potentially years later
If you have previously claimed capital allowances on qualifying assets (relevant for furnished holiday lets), these may reduce the acquisition cost — take specialist advice

Private Residence Relief — how it applies to landlords

If you ever lived in the property as your main home, Private Residence Relief (PRR) can significantly reduce the CGT charge:

PRR exempts from CGT the proportion of the gain attributable to periods when you occupied the property as your only or main residence
PRR calculation: (months of main residence occupation / total months of ownership) × total gain = exempt amount
Final 9 months: the final 9 months of ownership always qualify for PRR — regardless of whether you were living there. This protects landlords who moved out but took time to sell
Even a short period of owner-occupation creates a PRR entitlement — if you lived in the property for 2 years before letting it out, those 2 years (plus the final 9 months) are exempt
Evidence of occupation: keep utility bills in your name at that address, council tax records, GP/dentist registration — HMRC may request evidence of genuine main residence

Lettings Relief — restricted since April 2020

Lettings Relief was significantly restricted in April 2020:

Before April 2020: Lettings Relief was available where you let a property that was previously your main home — relief of up to £40,000 per person on the lettable gain
Since April 2020: Lettings Relief only applies where you shared the property with the tenant during the letting period — i.e. let a room in your main home while living there
Most landlords (who live separately from their tenants) can no longer claim Lettings Relief — the relief was effectively abolished for standard buy-to-let landlords from April 2020
Where Lettings Relief still applies: the relief is the lower of the PRR amount, £40,000, or the gain attributable to the letting period
If you have a complex PRR and Lettings Relief position (e.g. a property that was your home, then let, then possibly occupied again), take specialist tax advice before filing the CGT return

The 60-day reporting obligation

Report and pay CGT within 60 days of completion — this is mandatory:

From 27 October 2021, all UK residential property disposals must be reported to HMRC and estimated CGT paid within 60 days of completion
Use HMRC's 'Report and pay CGT on UK property' service — create a CGT UK property account via GOV.UK (separate from your self-assessment account)
File and pay within 60 days even if you are not sure of the exact tax position — you can make an estimated payment and correct it later via self-assessment
Penalties: £100 for reports filed up to 6 months late; £300 for up to 12 months late; then daily penalties. Interest runs on unpaid tax from the 60-day deadline
You must still include the disposal in your annual self-assessment return for the relevant tax year — the 60-day return is a separate obligation, not a substitute for self-assessment

Frequently asked questions

Do I need to report a BTL sale even if there is no CGT to pay?+

Yes — you must file a 60-day return for any disposal of a UK residential property even if no CGT is due (e.g. because the gain is within the £3,000 annual exempt amount, or because of losses). The only exception is where the property was your only or main home for the entire period of ownership and full Private Residence Relief applies. If you are unsure whether a return is required, report it — the penalty for failing to report when required is the same regardless of whether tax was due.

Can I offset capital losses from other property sales against my BTL gain?+

Yes. Capital losses from other property disposals (or other assets) in the same tax year can be offset against your residential property gain before applying the 24%/18% rate. Losses carried forward from previous years can also be used, but are applied after the annual exempt amount. If you have significant losses to offset, these reduce the 60-day payment — report the offsetting losses on the 60-day return to avoid overpaying.

I inherited a rental property — how is CGT calculated?+

Inherited property uses the market value at the date of death as the acquisition cost for CGT purposes (this is sometimes called the 'probate value'). Any CGT is calculated on the gain from the probate value to the eventual sale price. The person who inherits the property does not pay CGT at the time of inheritance — CGT only arises on a subsequent disposal. If the property was let after inheritance, follow the normal rules for CGT on a rental property disposal.

My property is jointly owned with my spouse — do we each get a CGT exempt amount?+

Yes. Each co-owner is entitled to their own annual CGT exempt amount (£3,000 each in 2025/26). The gain is split between owners according to their ownership share, and each owner applies their own exempt amount and CGT rate. If one spouse is a basic rate taxpayer, structuring ownership so they hold the majority of the property can significantly reduce the overall CGT liability — but transfers of ownership between spouses do not themselves trigger CGT. Take specialist advice on optimising ownership structure before a sale.