Capital Gains Tax on Rental Property UK

When you sell a UK buy-to-let held in your own name, any profit above your costs is normally subject to Capital Gains Tax (CGT), charged at 18% for gains that fall within your unused basic rate band and 24% for gains above it. Unlike rental income, which you generally report through your annual Self Assessment return, a residential property gain has its own tight reporting window: you must report and pay within 60 days of completion, well before your usual tax return is due.

This guide walks through how the gain itself is calculated, the annual tax-free allowance, the 60-day reporting deadline, and how the position differs if the property is owned through a limited company rather than personally. It assumes you already understand how rental profit itself is taxed year to year, which is covered separately in our tax on rental income guide.

Calculating the gain

The gain is broadly the sale price less the original purchase price, less certain allowable costs. Specifically:

• Start with the sale proceeds, less any costs of selling, such as estate agent fees and legal fees on the sale.
• Deduct the original purchase price, plus the costs of buying, such as Stamp Duty Land Tax paid at the time and legal fees on purchase.
• Deduct capital improvements made during your ownership, meaning works that added something to the property rather than simply maintaining it, such as an extension, a loft conversion, or adding a conservatory. Routine repairs and maintenance, which you would have already deducted against rental income as a revenue expense, cannot be deducted again here.

The result is your gain (or loss) before the annual exempt amount is applied. Our landlord allowable expenses guide covers the revenue versus capital distinction in more depth, since getting a cost into the wrong category, claiming a capital improvement against rental income instead of saving it for the CGT calculation, or vice versa, is one of the more common mistakes landlords make.

A worked example. You bought a rental flat for £180,000, paying £3,000 in legal fees and appropriate Stamp Duty Land Tax at the time. During your ownership you spent £15,000 adding a loft conversion, a capital improvement, on top of routine repairs and redecoration that you already claimed against rental income each year. You sell the flat for £260,000, paying £5,000 in agent and legal fees on the sale. Your gain is £260,000 minus £5,000 (selling costs) minus £180,000 (purchase price) minus £3,000 (buying costs) minus £15,000 (the loft conversion), giving a gain of £57,000, before the annual exempt amount is deducted.

If you owned the property jointly, for example with a spouse or civil partner, the gain is normally split according to your beneficial ownership share, and each of you separately applies your own annual exempt amount and tax bands to your share of the gain, which is one reason joint ownership can reduce the overall tax bill on a sale compared with sole ownership.

Annual exempt amount

Each individual has an annual tax-free allowance for capital gains, known as the annual exempt amount, which is £3,000 for the 2026/27 tax year. Only the gain above this amount is taxable, and any unused allowance cannot be carried forward to a future year, so it is lost if you do not have a gain to set it against.

Continuing the worked example above, a gain of £57,000 less the £3,000 annual exempt amount leaves £54,000 subject to tax. Whether that £54,000 is taxed at 18%, 24%, or split between the two depends on your other taxable income for the year: the portion of the gain that fits within your remaining basic rate band is taxed at 18%, and anything above that band is taxed at 24%. A landlord with little other income in the year of sale may find a meaningful slice of the gain falls in the lower band, while a higher rate taxpayer will typically pay 24% on the whole gain above the allowance.

Married couples and civil partners each have their own £3,000 allowance, so a jointly owned property effectively has £6,000 of tax-free gain available between two people before any tax is due, on top of whatever difference splitting the gain makes to which tax band each of you falls into.

Reporting window

For UK residents, you must report a residential property gain and pay any CGT due through HMRC's UK Property Account within 60 days of the completion date of the sale, which is a separate online service from your annual Self Assessment return. This is a strict deadline, not a target, and late reporting can trigger penalties starting from a fixed amount and increasing the longer the delay continues, plus interest on any tax paid late.

If your gain is fully covered by the annual exempt amount, or by another relief such as Private Residence Relief on a property that was genuinely your main home for part of your ownership, a 60-day return is generally not required for UK residents, though it is worth double-checking your specific position rather than assuming a relief applies without working through the figures.

The 60-day payment is treated as a payment on account of your final liability for the year. You still need to include the same disposal on your annual Self Assessment return for the tax year in which the sale completed, at which point any difference between the amount paid within 60 days and your final calculated liability, for example because you had other gains, losses or income to bring into account, is settled up. Since the 60-day return typically has to be filed based on incomplete information about your full-year income, it is common for the two figures to differ slightly, which is expected rather than a sign something has gone wrong.

Non-UK residents face the same 60-day reporting requirement but must report every disposal of UK land within that window regardless of whether any tax is actually due, which is a stricter rule than the UK resident position described above.

Company sales differ

If the property is owned through a limited company rather than personally, the sale is not subject to Capital Gains Tax at all. Instead, the company pays corporation tax on the gain as part of its normal trading profit, calculated broadly the same way (proceeds less cost and allowable improvements), but without an annual exempt amount and without the 60-day personal reporting requirement, since the gain is simply reported through the company's normal corporation tax return and accounts.

This is one of the genuine differences between personal and company ownership that is worth understanding before you decide how to hold property, alongside the Section 24 mortgage interest treatment and Stamp Duty Land Tax surcharge that also differ between the two structures. Our limited company buy to let guide covers the full comparison, including how getting profit, and eventually sale proceeds, out of the company personally is taxed again as a separate step.

It is also worth knowing that moving a property you already own personally into a company you control is normally treated as a sale for CGT purposes, even though no cash changes hands and you control both sides of the transaction. That can trigger exactly the CGT liability described in this guide, upfront, before any future benefit of company ownership begins, which is why transferring existing property into a company deserves careful modelling rather than being treated as a simple administrative change.

How Property HQ helps

Property HQ keeps a record of what you paid for a property, capital improvements made during your ownership, and the costs of buying and selling, all organised by property, so when a sale completes you and your accountant are working from an accurate, ready-made cost history rather than reconstructing years of invoices against a 60-day deadline.

Disclaimer

This guide is general information for UK landlords, not tax or legal advice. Capital Gains Tax calculations depend on your full circumstances, including reliefs that may apply. Check GOV.UK or a qualified adviser before relying on any figures for a real transaction.