Capital Gains Tax on Property UK: A Landlord’s Guide

Capital gains tax on property in the UK catches many landlords off guard, especially when a sale produces a larger profit than expected and the tax bill follows shortly after. This guide explains how CGT works for residential property, what rates apply in 2026/27, which reliefs are available and how to report and pay what you owe. Whether you own one buy-to-let or a growing portfolio, the figures here apply directly to you.

• What is capital gains tax on property?
• CGT rates on residential property in 2026/27
• How to calculate your capital gain
• The annual exempt amount
• Allowable deductions and costs
• Reliefs that can reduce your CGT bill
• Reporting and paying CGT on property
• CGT and self assessment
• Common mistakes landlords make
• Frequently asked questions

What is capital gains tax on property?

Capital gains tax (CGT) is a tax on the profit you make when you sell, or otherwise dispose of, an asset that has increased in value. For landlords, the most common trigger is selling a buy-to-let property, a holiday let or a second home. You are not taxed on the full sale proceeds, only on the gain, which is the difference between what you received and what you originally paid, after deducting allowable costs.

CGT on residential property is a separate category from CGT on other assets such as shares. It has its own rates and its own reporting deadlines, both of which are stricter than many landlords realise.

CGT rates on residential property in 2026/27

In 2026/27, the CGT rates that apply to residential property disposals are:

• 18%: for gains that fall within your basic rate income tax band
• 24%: for gains that fall within the higher or additional rate band

These rates apply to UK residential property that is not your main home. Since 30 October 2024, gains on commercial property and most other assets are taxed at the same 18% and 24% rates.

To work out which rate applies to you, add your taxable gain to your other taxable income for the year. Any gain that sits within the basic rate band (up to £50,270 in 2026/27) is taxed at 18%. Any gain above that threshold is taxed at 24%.

An example

Say your taxable income for 2026/27 is £35,000. The basic rate band runs to £50,270, so there is £15,270 of basic rate band remaining. If your taxable gain (after the annual exempt amount) is £40,000, the first £15,270 is taxed at 18% and the remaining £24,730 is taxed at 24%.

How to calculate your capital gain

The basic calculation is straightforward:

1. Take the sale price (or market value if you are gifting or transferring the property).
2. Deduct the original purchase price (or market value when you first owned it).
3. Deduct allowable costs (see below).
4. Deduct your annual exempt amount.
5. Apply the relevant CGT rate to the remaining gain.

The result is your CGT liability. If you have made losses on other asset disposals in the same tax year, or have carried-forward losses from earlier years, you can offset those against this gain before applying the rate.

The annual exempt amount

In 2026/27, every individual has a capital gains annual exempt amount of £3,000. This is the amount of gain you can make in a tax year before CGT becomes due.

The exempt amount cannot be carried forward. If you do not use it in a given tax year, it is lost. It also cannot be transferred to a spouse or civil partner, though both of you each have your own £3,000 allowance. If you own a property jointly, each owner is entitled to their own exemption, which is one reason why joint ownership can be tax-efficient.

Allowable deductions and costs

Reducing your gain through allowable deductions is one of the most practical ways to lower your CGT bill. HMRC allows you to deduct the following from your sale proceeds:

• Purchase price: what you originally paid for the property.
• Acquisition costs: solicitor and conveyancing fees, stamp duty land tax paid on purchase, surveyor fees.
• Improvement costs: capital expenditure that has permanently improved the property, such as an extension, a loft conversion or a new kitchen fitted at the time of purchase. Routine repairs and maintenance are not allowable here. Those are deducted against rental income instead.
• Disposal costs: estate agent fees, solicitor fees on sale, advertising costs.

Keep every receipt. If you cannot evidence a cost, HMRC will not allow it. Good bookkeeping throughout the life of your investment pays off directly when you come to sell.

What you cannot deduct

You cannot deduct mortgage interest, regular maintenance costs or letting agent fees from your capital gain. Those costs relate to your rental income, not to the disposal of the asset. Mixing the two up is a common error.

Reliefs that can reduce your CGT bill

Private Residence Relief (PRR)

If the property has ever been your main home, you may be entitled to Private Residence Relief. PRR exempts the proportion of the gain that relates to the period you lived in the property as your primary residence. The final nine months of ownership are also always treated as a period of occupation: useful if you moved out before selling.

PRR is calculated on a time-apportionment basis. If you lived in the property for five of the ten years you owned it, roughly half the gain may be exempt. The rules are detailed and the calculations can become complex, so take professional advice before assuming you qualify.

Lettings Relief

Lettings Relief used to be generous, but it was significantly restricted. It now only applies where the owner was living in the property at the same time as the tenant: a relatively unusual situation. If that does apply to you, the relief is capped at the lower of: the amount of PRR you received, the gain attributable to the letting period or £40,000.

Transferring assets between spouses

Transfers between spouses or civil partners are made on a “no gain, no loss” basis. This means you can move a property, or a share of one, to your spouse without triggering CGT at the point of transfer. This can be a legitimate way to use both partners’ annual exempt amounts and basic rate bands when you eventually sell. The transfer must be genuine and unconditional.

Incorporation relief

Some landlords transfer their property portfolio into a limited company. This can trigger CGT on the transfer unless incorporation relief applies. The conditions for incorporation relief are strict: in particular, the property activity generally needs to constitute a trade, which a standard buy-to-let portfolio usually does not. This is an area where specialist advice is essential before you proceed.

Reporting and paying CGT on property

This is where many landlords run into trouble. The rules changed in 2020 and they remain strict.

The 60-day reporting rule

If you sell a UK residential property and make a taxable gain, you must report it to HMRC and pay the CGT due within 60 days of completion. This applies even if you complete a self assessment tax return. The 60-day clock starts from the date of legal completion, not exchange of contracts.

You report through HMRC’s online “Report and pay CGT on UK property” service. You will need a Government Gateway account and your CGT on UK property account number.

Miss the 60-day deadline and HMRC will issue an automatic penalty, plus interest on the unpaid tax. The penalties can escalate if the return remains outstanding. Do not confuse the 60-day return with your annual self assessment return. They are separate obligations.

Estimating your CGT liability

When you file the 60-day return, you may not yet know your exact income for the full tax year. You are required to make a reasonable estimate. Once you complete your self assessment return, the CGT figure is reconciled and any underpayment or overpayment is adjusted at that point.

Non-UK residents

Non-UK residents who sell UK residential property must report the disposal within 60 days regardless of whether a gain or loss was made. The rules for non-residents are different in several respects, so take advice if this applies to you.

CGT and self assessment

Even after filing the 60-day return, you must also include the property disposal on your annual self assessment tax return for the relevant tax year. HMRC uses the annual return to reconcile the CGT you paid through the 60-day window against your actual income and tax position for the year. If the estimate you used in the 60-day return was too low, you will owe the difference. If it was too high, HMRC will refund it.

If you do not already submit a self assessment return, a property disposal that generates a taxable gain will require you to register. Do this promptly: registration deadlines apply.

Common mistakes landlords make

Missing the 60-day deadline

The most frequent error. Many landlords are not aware of the 60-day rule, or they assume they can wait until the end of the tax year. The penalty for a late return starts at £100 and increases. Pay the tax promptly even if your final liability is uncertain. You can correct it later.

Forgetting improvement costs

Landlords often forget to claim capital improvement costs they incurred years earlier. An extension added in year three of ownership is still deductible when you sell in year fifteen. Keep a running record of all capital expenditure from day one.

Confusing repairs with improvements

Replacing a like-for-like boiler is a repair: deductible against rental income, not against your gain. Installing a new bathroom where there was none before is an improvement: deductible against your gain. The distinction matters and HMRC scrutinises it.

Ignoring joint ownership rules

If a property is jointly owned, each owner calculates and reports their own share of the gain separately. Each uses their own annual exempt amount and their own income tax position to determine the applicable CGT rate. Calculating on the basis of a single owner’s position when two people own the property is incorrect.

Assuming PRR wipes out the entire gain

Private Residence Relief only covers the period of actual occupation (plus the final nine months). If you rented the property out for years before selling, PRR will not shelter the letting period. Work out the apportionment carefully before assuming the gain is exempt.