Capital gains tax when you sell a rental property: a UK landlord's guide

When capital gains tax applies

CGT is a UK-wide tax, so the same basic rules apply in England, Scotland, Wales and Northern Ireland. It is charged on the gain when you dispose of an asset, usually by selling it. Gifting a property to someone other than your spouse or civil partner is also treated as a disposal, normally at market value. Transfers between spouses or civil partners who live together are generally treated as no gain, no loss. If the property is owned by a limited company, the company pays corporation tax on the gain instead of CGT. Non-UK residents have separate rules, so check GOV.UK if that applies to you.

How the gain is calculated

• Start with the sale price (or market value if you gifted it).
• Deduct what you paid for the property.
• Deduct allowable purchase and selling costs, such as solicitor fees, Stamp Duty Land Tax paid on purchase, and estate agent and legal fees on the sale.
• Deduct the cost of capital improvements (see the next section).
• The result is your gain. Deduct any annual exempt amount and any losses to get the taxable gain.
• If you inherited the property, your starting cost is normally its value at the date of death, not what the previous owner paid.

Improvements count, repairs usually don't

For CGT you can deduct capital spending that improved the property and is still reflected in it when you sell, such as an extension, a loft conversion or a new bathroom where there wasn't one. Routine repairs, redecoration and replacing like for like are normally revenue costs. You claim those against rental income in the year they happen, not against the gain. The line can be blurry (a full kitchen upgrade, for example), and you cannot claim the same cost twice. If you aren't sure how a particular job is treated, ask an accountant. Mortgage interest is not an allowable cost for CGT.

Rates and the annual exempt amount

Everyone has an annual exempt amount, the part of total gains in a tax year that is tax-free. It was cut to £3,000 for individuals from the 2024/25 tax year, but check GOV.UK for the current figure. For residential property sold on or after 6 April 2024, the rates were 18% and 24%. Whether your gain is taxed at 18% or 24% depends on how much of your basic rate band is left after your taxable income, so a large gain can be taxed at both rates. These figures may change, so confirm the current rates on GOV.UK before you plan a sale.

The 60-day reporting and payment deadline

• If you sell UK residential property and there is CGT to pay, you generally have to report the gain and pay the tax within 60 days of completion, using HMRC's UK property CGT return.
• This applies even if you normally file Self Assessment. You usually also need to include the gain on your Self Assessment return for that tax year.
• Late reporting can lead to penalties and interest.
• Check the current rules on GOV.UK, especially if you owe no tax or have losses, as different reporting requirements may apply.
• Because the deadline is short, gather your figures before you exchange contracts, not after completion.

Ways landlords legitimately reduce the bill

• Use both partners' annual exempt amounts if the property is jointly owned, or if you transfer a share to a spouse or civil partner well before selling. Take advice first, as the transfer needs to be genuine.
• Claim all allowable costs and capital improvements, backed by invoices.
• Set any capital losses from other disposals against the gain. Losses generally need to be reported to HMRC within four years of the end of the tax year in which they arose.
• Think about timing. Completing just after 5 April rather than just before can use a second year's annual exempt amount and affect the rate you pay.
• If you lived in the property as your main home at some point, you may qualify for some private residence relief, including for the final months of ownership. Lettings relief is now very limited, so check GOV.UK.

Records to gather before you sell

• Completion statement and solicitor's invoice from when you bought.
• Evidence of the purchase price and Stamp Duty (or the equivalent tax in Scotland and Wales) paid.
• Invoices for capital improvements, with dates and descriptions of the work.
• Estate agent and legal fees for the sale.
• Dates showing any period you lived in the property.
• For inherited property, the probate valuation.

How Estateflow helps

Estateflow doesn't calculate or file CGT, and it isn't tax advice, but it helps you keep the paper trail that makes a sale less painful. Repair and maintenance jobs sent to contractors by WhatsApp or email are logged against the property, so you can see what was done and when, and which jobs might be improvements. Landlord statements show rent and costs by property for each period. Before you sell, you can also check rent and arrears are up to date and see gas safety, EICR and EPC expiry dates in one place. You can try it free for 3 months with no card, then £14.99 a month for 6 months, then £29.99 a month for unlimited properties. Keep the original invoices alongside, and share them with your accountant.

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