Capital Gains Tax on Rental Property UK 2026: A Landlord's Guide

When you sell a rental property in the UK, you pay capital gains tax on the profit above your £3,000 annual exempt amount. For 2026/27 the rates are 18% (basic-rate band) and 24% (higher and additional rate). You must report and pay within 60 days of completion.

Selling a buy-to-let is rarely a simple transaction. Beyond finding a buyer and instructing a solicitor, landlords face a tax bill that can run into tens of thousands of pounds — and a strict 60-day deadline to report and pay it. Capital gains tax (CGT) on residential property has changed significantly in recent years, with a smaller tax-free allowance and reformed reliefs. This guide explains exactly how CGT works on rental property in 2026, how to calculate what you owe, and the legitimate ways to reduce the bill.

What is capital gains tax on rental property?

Capital gains tax is a tax on the profit you make when you sell (or otherwise dispose of) an asset that has risen in value. For landlords, that asset is the rental property. You are not taxed on the full sale price — only on the gain, which is broadly the difference between what you paid for the property (plus certain costs) and what you sold it for. Because a buy-to-let is not your main home, it does not usually qualify for the full Private Residence Relief that shelters most homeowners from CGT entirely.

CGT rates on residential property in 2026

Residential property is taxed at higher CGT rates than other assets such as shares. The rate you pay depends on your total taxable income in the year of sale. Once your gain is added to your income, any part falling within the basic-rate band is taxed at the lower rate, and anything above it at the higher rate.

Your income tax band	CGT rate on residential property (2026/27)
Basic-rate taxpayer (gain within basic band)	18%
Higher-rate taxpayer	24%
Additional-rate taxpayer	24%

Note that a single gain can straddle both rates: the slice that fits inside your remaining basic-rate band is taxed at 18%, and the rest at 24%. If you own the property jointly — for example with a spouse — each owner is taxed on their share and each gets their own allowance and rate bands.

The annual CGT allowance

Every individual has an annual exempt amount — a slice of gains you can realise tax-free each year. This allowance has been cut sharply: it fell from £12,300 in 2022/23 to £6,000 in 2023/24, and to just £3,000 from April 2024, where it remains for 2026/27. The shrinking allowance means far more landlords now pay CGT, and pay more of it, than just a few years ago.

• The allowance cannot be carried forward — use it or lose it each tax year.
• Joint owners each have their own £3,000 allowance, doubling the tax-free slice on a co-owned property.
• Timing a sale across two tax years (e.g. via staged disposal) is rarely practical for a single property, but matters if you sell several assets.

How to calculate your capital gain

To work out your taxable gain, start with the sale price, subtract the original purchase price, then deduct allowable buying, selling and improvement costs and your annual allowance. Allowable costs include:

• Stamp duty land tax paid when you bought the property
• Solicitor and conveyancing fees on purchase and sale
• Estate agent or auction fees on the sale
• Capital improvements (e.g. an extension or new kitchen) — but not routine repairs or maintenance, which you claim against income instead

Here is a simplified worked example for a higher-rate landlord selling a property bought for £180,000 and sold for £300,000.

Calculation step	Amount
Sale price	£300,000
Less purchase price	−£180,000
Less buying/selling/improvement costs	−£15,000
Gross gain	£105,000
Less annual allowance	−£3,000
Taxable gain	£102,000
CGT at 24%	£24,480

Reliefs that can reduce your CGT bill

If the property was ever your only or main home, you may qualify for Private Residence Relief (PRR) covering the period you lived there, plus the final nine months of ownership regardless of whether you lived there at the time. The gain is then apportioned between the exempt and chargeable periods.

Lettings Relief still exists but is now very narrow: since April 2020 it generally only applies where you shared occupancy of the property with your tenant. For most buy-to-let landlords who never lived in the property alongside tenants, Lettings Relief will not be available. Always confirm your eligibility with a qualified accountant before relying on either relief.

The 60-day reporting and payment rule

This is the deadline that catches landlords out. When you sell a UK residential property at a gain, you must report it to HMRC and pay the CGT due within 60 days of completion using a UK Property Disposal return — separate from your annual self-assessment. Missing the deadline triggers automatic penalties and interest. You still declare the disposal again on your self-assessment return, with the 60-day payment treated as a credit.

Legitimate ways to reduce your CGT

There are several legal planning steps landlords commonly use to manage a CGT bill:

1. Use both spouses' allowances and bands. Transferring a share to a spouse or civil partner before sale (a no-gain/no-loss transfer) can double the allowance and use a lower-rate band.
2. Keep meticulous records of capital improvements. Every allowable cost you can evidence reduces the gain.
3. Offset capital losses from other assets sold in the same or earlier years.
4. Time the disposal to fall in a year when your income — and therefore your CGT rate — is lower.

These are general principles, not personal advice. CGT planning is highly fact-specific, and an accountant will model the most efficient route for your circumstances.

Common mistakes landlords make

The most expensive errors we see are missing the 60-day deadline, confusing repairs (income-deductible) with improvements (CGT-deductible), forgetting that the allowance has dropped to £3,000, and assuming Lettings Relief still applies when it usually does not. A good letting agent or accountant will flag these well before completion — which is one reason it pays to work with a professional you trust. AgentCheck lets you compare 13,680 letting agents across 504 areas so you can find one with the local market knowledge to support a profitable exit.

Related guides

• Landlord Tax: The Complete UK Guide for 2026/27
• Buy-to-Let Mortgage Rates 2026: What UK Landlords Should Know
• How to Maximise Rental Yield in 2026: A UK Landlord's Strategy Guide

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This guide is general information, not tax advice. CGT rules and rates can change and depend on your personal circumstances — always consult a qualified accountant or tax adviser before selling.

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