Capital Gains Tax (CGT)

Key figures for 2026 to 2027

How Capital Gains Tax Works on a Rental Property

Capital Gains Tax (CGT) is a tax on the profit you make when you dispose of an asset, not on the full sale price. When a landlord sells a buy-to-let, the gain is broadly the sale price less what the property cost and the allowable costs of buying, improving and selling it.

The gain for the year is added on top of your taxable income to decide which rate applies. Any part of the gain that fits inside your unused basic-rate band is taxed at 18%; the rest is taxed at 24%. Because a single property sale can produce a five or six-figure gain, many landlords who are basic-rate taxpayers on their income find most of the gain falls into the higher rate.

The date of disposal for CGT is normally the date contracts are exchanged, not the date the sale completes. That decides which tax year the gain falls in, which matters if you exchange in late March and complete in April.

Working Out the Gain: What You Can and Cannot Deduct

Costs you can usually deduct from the sale price:

• the original purchase price (or the market value when you acquired the property, if it was a gift or inheritance);
• buying costs, such as Stamp Duty Land Tax, solicitors' and surveyors' fees;
• capital improvements that are still reflected in the property when you sell, such as an extension, a loft conversion or a new kitchen that upgrades rather than replaces like for like;
• selling costs, such as estate agent, consultancy, legal and marketing fees.

Costs you cannot deduct from a capital gain:

• mortgage interest and arrangement fees on refinancing;
• routine repairs, redecoration and maintenance;
• letting agent fees, insurance and other running costs.

Those are income items dealt with on your rental income tax return. Claiming them twice is a common mistake that HMRC looks for.

A Worked Example

This example is illustrative only. A landlord who already earns £45,000 a year sells a terraced buy-to-let held in sole name.

With income of £45,000, £5,270 of the basic-rate band is unused (£50,270 less £45,000, ignoring other reliefs), so £5,270 is taxed at 18% (£949) and £72,730 at 24% (£17,455), giving CGT of about £18,404. It would normally be reported and paid within 60 days of completion.

If the same property were owned 50:50 with a spouse who has no other income, each owner would have their own £3,000 allowance and basic-rate band, and the combined tax could be several thousand pounds lower. Try your own figures in our Landlord Exit Calculator.

Why CGT Matters When Selling a Whole Portfolio

Each property in a portfolio is a separate disposal, but all gains and losses in the same tax year are added together. That has practical consequences for a portfolio sale:

• One year or several. Selling everything in one tax year uses only one annual exempt amount and one basic-rate band per owner. A phased sale across two or more tax years can reduce the total bill, but means keeping mortgages, tenants and compliance duties for longer.
• Losses. A property sold at a loss reduces gains on others in the same year, so the order and timing of sales can matter.
• Apportioning one price. When a buyer pays a single price for the whole portfolio, it has to be split between the properties on a reasonable, documented basis. Your solicitor and accountant should agree this before exchange.
• Cash flow. Several completions can each start their own 60-day reporting clock, and the tax must be paid from the sale proceeds after mortgages are redeemed. Make sure enough is held back.

Reliefs and Special Situations

• Former homes. If you once lived in the property as your main home, Private Residence Relief can exempt the period you lived there plus the final nine months of ownership. Lettings relief now applies only where you shared the home with your tenant.
• Spouses and civil partners. Transfers between spouses or civil partners living together are treated as no gain, no loss, which can allow a property to be held in the names that use allowances best. The transfer must be genuine and is best done well before a sale is agreed.
• Incorporation. Moving a portfolio into a company is a disposal for CGT. Incorporation relief may defer the gain where the letting amounts to a business, but from 6 April 2026 it has to be claimed rather than applying automatically.
• Inherited property. On death, assets are generally rebased to their market value with no CGT, although Inheritance Tax may apply. This is one reason some older landlords weigh selling against holding.
• Companies. A limited company pays Corporation Tax (19% to 25%) on its gains rather than CGT, and extracting the proceeds can create further tax for the shareholders.

How the Rates Have Changed

Landlords have seen several changes in recent years, which is why older calculations or advice may no longer be reliable:

Since 30 October 2024 the main rates for other assets have matched the residential rates, so there is no longer a rate difference between property and, for example, shares.

Common Mistakes to Avoid

• Missing the 60-day deadline because the sale is also going on a Self Assessment return. Both are needed.
• Deducting repairs or mortgage interest from the gain.
• Losing the invoices for improvements made years ago. HMRC can ask for evidence.
• Forgetting that joint owners each report their own share.
• Transferring ownership to a spouse after a buyer has been found, which can look artificial.
• Assuming the tax year of completion is the tax year of the gain.

How PSC Can Help

We do not give tax advice, but a realistic view of what each property and the portfolio as a whole could sell for is the starting point for any CGT calculation. Our portfolio appraisal gives you and your accountant property-by-property figures, and we can structure a sale in one go or in phases to suit the advice you receive.

Official Sources and Further Reading

• GOV.UK: Capital Gains Tax rates and allowances
• GOV.UK: Tax when you sell property
• GOV.UK: Report and pay Capital Gains Tax on UK property
• HMRC Capital Gains Manual

General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.