Capital Gains Tax When You Sell a Rental Property in 2026

Selling a buy-to-let is not the end of the tax story. In most cases, it is when the CGT bill arrives.

Capital Gains Tax on a UK residential property disposal does not sit quietly in your annual Self Assessment return. From 6 April 2020, a separate reporting and payment requirement was introduced, initially with a 30-day deadline. Since 27 October 2021, that window has been 60 days. Miss it and HMRC charges an automatic penalty before a single conversation takes place.

Today, 6 April 2026, is also the start of a new tax year, which means updated rates and a changed landscape for anyone considering selling. This guide covers the rates that apply from today, how to calculate your gain correctly, what reduces the bill, and how to meet the 60-day deadline without catching yourself out.

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CGT Rates on Residential Property: 2026/27

CGT rates for UK residential property have not changed for 2026/27. They are the same as last year, and have been in place since 6 April 2024, confirmed by GOV.UK.

• Basic rate taxpayer: 18%
• Higher rate or additional rate taxpayer: 24%

These rates apply to gains on residential property above your annual exempt amount (see below). They are different from the CGT rates on shares and other assets, which are 18% and 24% respectively from 2024. For residential property, the distinction that matters is which income tax band the gain falls into. If the taxable gain sits partly in the basic rate band and partly in the higher rate band, the portion in each band is taxed at the corresponding rate.

Annual exempt amount: £3,000

Every individual gets a £3,000 annual exempt amount (AEA) for capital gains. Only the gain above this threshold is taxed. HMRC confirmed in 2024 that the AEA is permanently fixed at £3,000 for individuals from the 2024/25 tax year onwards. It is not index-linked and is not expected to change.

Significantly lower than the £12,300 AEA that applied until 2022/23. If you were relying on a large exempt amount to soften the blow, do not. For most property disposals, the AEA barely touches the bill.

A note on BADR: not relevant to most buy-to-let landlords

Business Asset Disposal Relief (BADR) changes from today: the rate rises from 14% to 18%, confirmed by HMRC's internal manual (CG64174). BADR only applies to qualifying business assets, such as shares in a trading company or a business you have personally run. A passive buy-to-let property does not qualify. If you own your properties through a limited company and you are selling the company itself, not the properties, BADR may be relevant, but that is a specialist area requiring separate advice. For most landlords selling a buy-to-let, BADR does not apply.

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The 60-Day Rule: What It Is and Why It Catches People Out

Most landlords get this part wrong. The assumption that CGT on a property sale can wait until the 31 January Self Assessment deadline is incorrect. It is not optional, and HMRC enforces it.

Since 27 October 2021, UK residents selling a UK residential property must report and pay any CGT due within 60 days of the completion date. This is not 60 days from exchange, or from moving out. It is 60 days from when the legal title transfers on completion.

Reporting is done through HMRC's CGT on UK property account, accessed via Government Gateway at gov.uk. You log in, enter the disposal details, and HMRC generates a payment reference. You then pay the CGT by the 60-day deadline using that reference.

Common mistake: assuming it goes on your SA return

If you already complete a Self Assessment return, you will also need to include the same disposal on your annual return. But the 60-day return is separate, and it must happen first. The SA return reconciles everything at the end of the year. Any CGT already paid via the property account gets credited, and any under or overpayment is settled at the SA deadline. You cannot skip the 60-day step and put it all on the SA return in January.

Penalties for missing the deadline

Miss the 60-day deadline and HMRC charges the same late filing penalties that apply to Self Assessment. An automatic £100 penalty applies from day one. After that, percentage-based surcharges apply to the unpaid tax. Interest runs on any unpaid amount from the due date. There is no soft landing for this deadline.

If you are in the middle of a sale, put the 60-day return in your diary at the point you exchange contracts. Completion dates can shift, but knowing the clock starts on completion means you are not caught out.

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How to Calculate Your Gain

The basic calculation is:

Net sale proceeds minus allowable costs = gain

Working through each element:

Net sale proceeds

Start with the agreed sale price and deduct your selling costs. Selling costs that HMRC allows as deductions include estate agent fees and legal fees directly related to the disposal. Do not net off any costs that were paid from rental income over the years; those are revenue deductions and have already been claimed.

Allowable costs (base cost)

Add together:

• The original purchase price
• Acquisition costs: legal fees, survey fees, the SDLT you paid when you bought the property
• Enhancement expenditure: this means capital spending on permanent improvements that are still evident in the property at the point of sale. Extensions, conversions, a new kitchen or bathroom installed as an upgrade rather than a repair. Routine maintenance and repairs do not count, and neither does any expenditure already claimed as a letting expense.

The gain

Net proceeds minus base cost equals your gain. Then deduct your annual exempt amount (£3,000 for 2026/27). The remaining figure is your taxable gain.

Apply 18% if the gain falls within your basic rate band, or 24% if you are a higher or additional rate taxpayer. If the gain straddles two bands, split accordingly.

Worked example

A landlord bought a terraced house in 2018 for £180,000. Acquisition costs at the time were £4,000 (legal fees, survey, SDLT). Over the years they spent £15,000 on a rear extension. In 2026 they sell for £280,000. Their estate agent and legal fees on disposal came to £8,000.

• Net proceeds: £280,000 minus £8,000 = £272,000
• Base cost: £180,000 plus £4,000 plus £15,000 = £199,000
• Gain: £272,000 minus £199,000 = £73,000
• Less annual exempt amount: £73,000 minus £3,000 = £70,000 taxable gain
• At 24% (higher rate taxpayer): CGT bill of £16,800

That £16,800 must be reported and paid within 60 days of completion. It is not small, and it is not deferred.

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What Can Reduce Your CGT Bill

Several things can legitimately reduce what you owe. Some are straightforward. Others have been significantly restricted in recent years.

Principal Private Residence (PPR) relief

If you lived in the property as your main home at any point, PPR relief may apply to the period of actual occupation. The final 9 months of ownership also qualify for PPR regardless of whether you were living there, provided it was your main residence at some earlier point. The calculation is proportional: the fraction of ownership during which PPR applies is exempt from CGT. This is worth exploring if you converted a former home into a rental rather than buying purely as an investment from the outset.

Letting Relief

Letting Relief used to provide up to £40,000 of relief for landlords who had also lived in their property. From 6 April 2020, it was restricted significantly. It now only applies where you were physically sharing the property with your tenants while it was let, occupying part of it as your main home at the same time. For the vast majority of buy-to-let landlords who moved out before renting the property, Letting Relief no longer applies. Do not assume it does.

Losses from other disposals

If you make a capital loss elsewhere in the same tax year (for example on shares), those losses can be offset against your property gain before tax is calculated. Losses must be reported to HMRC. They do not automatically apply.

Transferring to a spouse or civil partner

A transfer between spouses or civil partners is treated as taking place at no gain and no loss for CGT purposes. This means you can transfer assets between you without triggering CGT at the point of transfer. It also means you can arrange for a property disposal to be split between two individuals, each using their own £3,000 annual exempt amount and, potentially, their own basic rate band. This needs to be a genuine transfer of beneficial ownership and should be done before exchange of contracts, not after. It is worth discussing with a tax adviser before any sale.

Spreading disposals across tax years

If you are selling multiple properties, disposing of them in different tax years means each disposal gets its own £3,000 AEA and potentially a fresh basic rate band. Whether this is practical depends on your individual circumstances, but it is worth considering if you are planning a portfolio wind-down over several years.

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MTD and CGT: Do They Interact?

From today, Making Tax Digital for Income Tax is live for landlords and sole traders whose total qualifying income exceeded £50,000 in the 2024/25 tax year. Qualifying income includes both property income and self-employment income combined. If you are in scope, you are now required to keep digital records and submit quarterly updates to HMRC.

CGT does not fall within MTD. The 60-day CGT return is a completely separate HMRC service. MTD tracks your rental income and expenses throughout the year. It does not capture capital gains from property sales. When you sell, you still go through the CGT on UK property account, exactly as you would if MTD did not exist.

The two systems do connect at the end of the year through your Final Declaration (the MTD equivalent of the SA return). The disposal will still appear there, and any tax already paid via the 60-day route gets credited. But the 60-day deadline is unchanged and unaffected by MTD.

If you are in scope for MTD and considering selling a property, keep the two processes clearly separate in your mind. MTD tracks the rental income. The 60-day return handles the disposal. Both apply, and neither replaces the other.

For a full breakdown of MTD obligations, see our guide: Making Tax Digital: What Landlords Earning Over £50k Need to Do Now.

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Before You Sell: Things Worth Checking First

Check your base cost carefully. Many landlords underestimate their allowable costs. SDLT on purchase is deductible and is often forgotten. So is the survey. So is any capital improvement expenditure that was genuinely a permanent enhancement. Keep records. HMRC can ask you to evidence these figures.

Know your income position for the year. CGT on property is charged at 18% or 24% depending on whether you are a basic or higher rate taxpayer in the year of disposal. If your income is near the threshold, the timing of a disposal within the tax year can affect the rate that applies to part of the gain.

Decide whether to sell, hold, or restructure. CGT is one consideration. The rental yield, the mortgage position, and your future plans matter too. Run the numbers before you decide. If you are thinking about whether to sell or keep a property, our hold-or-sell guide walks through the analysis: Hold or Sell? How to Decide When a Buy-to-Let Is No Longer Worth Keeping.

Get the 60-day diary date in immediately. Do not wait until completion to think about reporting. The clock starts from completion, not exchange, but by the time you reach completion you will have other things on your mind.

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This article is for informational purposes only and does not constitute financial or investment advice. Tax rules and legislation change frequently. Always verify current rates with HMRC or GOV.UK and seek independent professional advice before making investment decisions.