Is VAT charged when selling a rental property?
Letting and selling existing residential property is exempt from VAT, so landlords do not charge VAT on rent or the sale price but cannot reclaim VAT on their costs. Commercial property is different: if the owner has opted to tax, VAT is charged, though a tenanted sale can often be a transfer of a going concern outside VAT.
Read more in our guide: Selling a property portfolio
VAT treatment by type
| Supply | VAT treatment |
|---|---|
| Residential rent | Exempt |
| Sale of existing residential property | Exempt |
| First sale of a new-build home by the developer | Zero-rated |
| Commercial rent or sale | Exempt unless opted to tax, then 20% |
| New commercial building (under 3 years) | Standard rated |
| Agent and legal fees | Usually 20% VAT |
Residential landlords
Most landlords never register for VAT, because residential rent is exempt. The downside is that VAT on agent fees, repairs and refurbishments is a real cost. Short-term holiday letting is different: it is standard rated, so operators over the VAT threshold must charge VAT on stays.
Commercial and mixed-use property
An owner can opt to tax a commercial building, making rent and sale price standard rated so they can recover VAT on costs. The option does not apply to the residential parts of a mixed-use building, such as flats above a shop, so the price must be apportioned.
Transfer of a going concern
When a let commercial property that has been opted to tax is sold with the lease in place, the sale can be a transfer of a going concern (TOGC) and fall outside VAT, provided the buyer is VAT registered, opts to tax before the tax point, and continues the letting. Getting this wrong means 20% VAT on the whole price, so solicitors check the conditions carefully.
VAT and Stamp Duty
Where VAT is charged on a purchase, Stamp Duty Land Tax is calculated on the VAT-inclusive price, which is another reason TOGC treatment matters.
Official Sources and Further Reading
- GOV.UK: land and property (VAT Notice 742)
- GOV.UK: opting to tax land and buildings (VAT Notice 742A)
- GOV.UK: transfer a business as a going concern (VAT Notice 700/9)
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.
Frequently Asked Questions
Letting and selling existing residential property is exempt from VAT, so landlords do not charge VAT on rent or the sale price but cannot reclaim VAT on their costs. Commercial property is different: if the owner has opted to tax, VAT is charged, though a tenanted sale can often be a transfer of a going concern outside VAT.
Generally not, because residential letting is exempt. Some conversion work, such as turning a commercial building into homes, qualifies for a reduced 5% rate.
No. HMO rooms let as homes are residential and exempt.
Ask the seller for evidence of the option and HMRC's acknowledgement. Buyers' solicitors raise this as a standard enquiry.
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