You’ve got a rental or a second home that’s gone up in value. Maybe you’re:
- Selling to pay down debt,
- Exiting one property to fund another, or
- Thinking about moving everything into a limited company / SPV.
And the big question is:
“If I sell this property, how much Capital Gains Tax will I actually pay and is there anything I can do about it?”
This guide is written for UK landlords, both those who hold property personally and those using a limited company or SPV.
We’ll cover, in plain English:
- When landlords do and don’t pay Capital Gains Tax (CGT) on property sales
- How CGT is calculated step-by-step on a buy-to-let or second home
- The current CGT rates and allowances for 2025/26 and 2026/27
- How things change if your rental sits in a limited company / SPV
- Practical planning ideas to help you keep more of what you earn
All facts are based on GOV.UK guidance and current legislation for 2025/26, plus measures already confirmed as continuing into 2026/27.
1. Do landlords pay Capital Gains Tax when they sell a buy-to-let?
1.1 Personally owned rentals and second homes
If you own property in your own name, you may have to pay CGT when you sell:
- A buy-to-let or other rental in your own name
- A second home or UK holiday home
- A property you inherited and later sell, if it has not always been your only or main home
You normally do not pay CGT if all of these apply:
- You have one home and you’ve lived in it as your main home for all the time you’ve owned it
- You have not let out part of it (having a lodger is usually fine)
- You have not used part of it exclusively for business
- The grounds (including all buildings) are under 5,000 m² (just over an acre)
- You did not buy it just to make a gain
In that case, Private Residence Relief (PRR) means no CGT to pay.
If you’ve ever:
- Let the property out as a rental,
- Used part of it purely for business, or
- Spent long periods living elsewhere,
you may get partial relief but part of the gain can still be taxable.
1.2 What if the rental is in a limited company or SPV?
If your rental is owned by a limited company / SPV, the tax is different:
- The company does not pay CGT, it pays Corporation Tax on any chargeable gain when it sells the property, as part of its overall profits.
- You personally are only taxed when you take value out of the company, for example via dividends, salary or selling / winding up your shares.
So for company/SPV landlords, the real question is:
“What’s the total tax hit between the company’s gain and the tax I pay personally when I extract the cash?”
That’s why it helps to read this guide alongside your existing content on setting up a property limited company / SPV and whether to hold property in an SPV or in your own name, those pieces tackle the bigger “where should I hold my portfolio?” question.
2. How does Private Residence Relief work if I’ve ever lived in the property?
Many landlords have properties that started life as their own home and later became a rental.
Private Residence Relief (PRR) can protect some or all of the gain if the property has been your only or main home for part of the time you’ve owned it.
In simple terms:
- The period you genuinely lived there as your main residence usually qualifies for relief
- The final 9 months of ownership usually qualify too, even if you’ve already moved out
- Periods it was fully let or used for other purposes are normally chargeable
If you’ve got one of these “lived in, then let out” stories, this guide pairs well with a more detailed blog on Private Residence Relief and letting for landlords, where you can go deeper into timelines and edge cases.
3. How do you calculate Capital Gains Tax on a rental property?
For personally owned rentals and second homes, the basic gain calculation is:
Gain = Sale proceeds – (Purchase cost + buying/selling costs + capital improvement costs)
3.1 What counts as “sale proceeds”?
Usually the sale price on your completion statement, adjusted for any selling costs taken directly from that figure (for example, estate agent fees deducted from the proceeds).
3.2 What is your “purchase cost” (base cost)?
Normally:
- What you paid to buy the property, or
- The probate value at the date of death if you inherited it
On top of that, you can add certain allowable costs of buying and selling, including:
- Stamp Duty Land Tax (SDLT) you paid when you bought the property (including the 3% additional property surcharge)
- Legal / conveyancing fees on purchase and sale
- Estate agent fees
- Land Registry fees
- Certain professional fees directly linked to the transaction
These reduce the gain and therefore your CGT bill.
You cannot treat as CGT costs:
- Mortgage interest and arrangement fees
- Normal repairs and maintenance (painting, boiler servicing, like-for-like replacements)
- Insurance, utilities, council tax and letting agent fees
Those sit on the rental income side instead.
3.3 What counts as capital “improvement” costs?
You can add the cost of works that add value or change the property, and which are still reflected when you sell. GOV.UK examples include costs of improving a property, rather than just repairing it.
Typical landlord examples:
- Building an extension or converting a loft
- Converting a garage into living space
- Changing layout (for example, creating an extra bedroom)
- Upgrading from a basic to a significantly higher-spec kitchen or bathroom
Routine repairs and decoration are not usually capital:
- Repainting between tenants
- Fixing a broken boiler
- Like-for-like replacement windows
Those remain deductible against rental income, not capital gains.
4. What are the Capital Gains Tax rates and allowance for 2025/26 and 2026/27?
4.1 Capital Gains Tax allowance (Annual Exempt Amount)
For individuals, the tax-free CGT allowance – the Annual Exempt Amount – is:
- £3,000 per tax year from 2024/25 onwards
For most trusts, it’s £1,500 from the same date.
Under current rules, this £3,000 allowance applies in 2025/26 and continues into 2026/27, unless a future Budget changes it.
If your total taxable gains in a year are below the allowance, there’s no CGT to pay, although you may still need to report the gains if your disposals exceed certain proceeds limits or you’re already in Self Assessment.
4.2 CGT rates on residential property gains
For residential property gains that are not fully covered by Private Residence Relief, the CGT rates for individuals are:
- 18% on gains that fall within your unused basic rate band, and
- 24% on gains above that (higher and additional-rate band)
The higher rate of CGT on residential property was cut from 28% to 24% from 6 April 2024, and official guidance confirms that the 18% / 24% structure remains in place for disposals beyond October 2024 – covering 2025/26 and 2026/27 under current legislation.
There is no separate “landlord rate”: landlords use the same residential property CGT rates as other individuals.
4.3 How do your income and gains interact?
HMRC look at your income and gains together to decide how much of your taxable gain is at 18% vs 24%:
- Work out your taxable income for the year (after personal allowance and reliefs).
- Work out your taxable gains, after deducting allowable costs, any capital losses and the £3,000 allowance.
- Add your taxable gains on top of your income:
- Any part of the gain that sits within the unused basic rate band is taxed at 18%.
- Any part above that band is taxed at 24%.
This is why timing and joint ownership can make a noticeable difference for landlords.
5. Worked example: how much CGT will you pay if you sell a buy-to-let?
Let’s put some numbers to this.
Example – Sarah’s Manchester buy-to-let (personally owned)
- Bought: June 2015 for £180,000
- SDLT (incl. 3% surcharge): £7,400
- Legal / other acquisition fees: £1,600
- Extension (capital improvement) in 2018: £20,000
- Selling: July 2025 for £280,000
- Selling costs (agents + legal): £5,000
- Sarah has never lived in the property, it’s always been a rental.
Step 1 – Calculate the gain
| Item | Amount |
|---|---|
| Sale proceeds | £280,000 |
| Purchase price | £180,000 |
| SDLT on purchase | £7,400 |
| Legal / other acquisition fees | £1,600 |
| Capital improvement (extension) | £20,000 |
| Selling costs (estate agent + legal) | £5,000 |
| Total allowable cost | £214,000 |
| Gain (sale – total allowable cost) | £66,000 |
Step 2 – Deduct the annual CGT allowance
Assume:
- Sarah has no other gains this year
- The property is in her sole name
- She gets the full £3,000 allowance
Taxable gain = £66,000 – £3,000 = £63,000
Step 3 – Apply the CGT rates
Scenario A – Sarah is a higher-rate taxpayer
All £63,000 sits above her basic rate band → taxed at 24%:
CGT ≈ £15,120
Scenario B – Sarah has £10,000 of basic rate band spare
- £10,000 of the gain at 18% = £1,800
- £53,000 of the gain at 24% = £12,720
CGT ≈ £14,520
Same property, same gain, £600 difference just from where it falls in the tax bands.
If Sarah owned the property jointly with her spouse, they could each use a £3,000 allowance and their own rate bands, potentially reducing the bill further.
6. How does this change if my rental is in a limited company or SPV?
If the same property sits inside an SPV / property company:
6.1 Tax at the company level
When the company sells the property:
- It calculates a chargeable gain in a very similar way:
- Sale proceeds
- Minus purchase cost, SDLT, legal fees, selling costs and capital improvements
- That gain is added to the company’s other profits
- The total is taxed at the Corporation Tax rate that applies to the company for that year
There is no CGT inside the company, it’s all Corporation Tax.
6.2 Tax when you take the money out personally
You only feel the money personally when you extract it from the company, for example as:
- Dividends
- Extra salary or bonuses
- A capital distribution on winding up
- Proceeds from selling your shares
Those routes carry Income Tax or CGT on shares for you as the shareholder.
This is why your other content on “holding property in an SPV vs in your own name” is so important, the CGT vs Corporation Tax comparison is only one part of the full picture.
7. What happens if I move my personally owned rentals into a company?
A very common landlord question:
“If I move my rentals into a company now, do I avoid Capital Gains Tax later?”
For most landlords, a transfer of personally owned rentals into your own company is treated as if you sold the properties to the company at market value. That can mean:
- CGT for you personally, based on the market value at transfer, and
- Stamp Duty Land Tax for the company on the acquisition
There is a possible relief called Incorporation Relief where, if you are transferring a genuine property business (not just a passive investment), you can roll the CGT into the value of the shares instead of paying it immediately. The detail is technical and fact-sensitive, so it’s something to link back to in your dedicated blog on moving property into a limited company for UK landlords.
Either way, for most landlords this is not a quick trick to “make CGT go away”, it’s a structural decision which needs modelling from purchase right through to exit.
8. When and how do landlords have to report and pay CGT?
8.1 UK-resident individuals selling UK residential property
If you’re a UK-resident individual and you sell a UK residential property with CGT to pay, you must:
- Report the disposal using HMRC’s “Capital Gains Tax on UK property” online service, and
- Pay the CGT within 60 days of completion
Key points:
- The 60-day clock starts on completion, not exchange.
- HMRC can charge interest and penalties if you report or pay late.
- Later, you also include the gain on your Self Assessment return, the 60-day payment is a payment on account.
8.2 Non-resident landlords
If you are not UK-resident, you must report all disposals of UK property or land within the same 60-day deadlines, even if there is no tax to pay or you’ve made a loss.
This non-resident property CGT return is separate from both the UK property service for residents and your Self Assessment return.
8.3 Companies / SPVs
For UK-resident companies, there is no 60-day CGT property report. Instead:
- Property gains are included in the company’s Corporation Tax return for the period in which the sale completes.
9. How can landlords legally reduce the tax when they sell?
A few practical, non-aggressive planning ideas:
- Use both spouses’ allowances and rate bands
- Owning property jointly can give you two £3,000 CGT allowances and more basic-rate band taxed at 18%, if one of you has lower income.
- Think about timing
- Completing sales in a year when your other income is lower can push more of the gain into the 18% band. Conversely, stacking large gains into a year where you’re already at the top rate can increase the overall bill.
- Capture every allowable cost
- Make sure your SDLT, legal fees, estate agents’ fees and improvement costs all make it into the calculation. Missing just SDLT and legal fees on a couple of sales can mean thousands of pounds of unnecessary CGT.
- Use capital losses
- Losses on other investments can be set against gains, either in the same year or carried forward to future years, reducing the CGT bill.
- Plan your exit before you incorporate
- Moving into a company can swap one CGT bill for a combination of Corporation Tax plus tax on dividends or share disposals later. Modelling this properly is usually cheaper than discovering the double-tax effect five years down the line.
- Stay inside the rules
- HMRC’s focus is increasingly on property, non-resident disposals and use of reliefs. If a scheme sounds too good to be true, it probably is.
This is where your broader landlord content, on Should You Hold Property in an SPV or Your Own Name? (UK, 2025/26), cashflow forecasting, and moving property into a limited company, all helps readers see that CGT is just one part of their overall tax and cash picture.
10. Common Capital Gains Tax mistakes landlords make
A few patterns we see again and again:
- “It was a home at some point, so it’s exempt, right?”
Not necessarily. If it hasn’t always been your only or main home, or if there were long letting periods, only part of the gain may be covered by Private Residence Relief. - Forgetting SDLT, legal fees and agents’ fees
GOV.UK is clear you can deduct costs of buying and selling, including SDLT and legal costs, leaving them out means you overstate the gain. - Missing the 60-day reporting deadline
Landlords often assume they can deal with everything in January, then receive letters about interest and penalties because the 60-day window after completion has already closed. - Incorporating on a hunch
Shifting properties into a company “because everyone else is doing it”, without checking CGT, SDLT and your exit plan, often leads to a bigger overall tax bill, not a smaller one.
11. Quick Q&A, Capital Gains Tax on rental properties (UK landlords)
Do I pay Capital Gains Tax if I sell a buy-to-let in my own name?
Yes, unless the property is fully covered by main-home relief. You’ll pay CGT on the gain above your £3,000 annual allowance, at 18% and/or 24% depending on your income.
What costs can I deduct when working out my property gain?
You can deduct the property’s purchase price, SDLT, legal and estate agents’ fees, and capital improvement costs that are still reflected when you sell. Routine repairs, mortgage interest and day-to-day running costs are not CGT deductions.
What CGT rates do landlords pay on property gains in 2025/26 and 2026/27?
For individuals, residential property gains are taxed at 18% within your basic-rate band and 24% above it. These 18% / 24% rates apply to residential property disposals from 6 April 2024 onwards under current rules.
How does it work if my rentals are in a limited company or SPV?
The company pays Corporation Tax on its chargeable gain when it sells a property. You then pay tax personally when you extract profits (for example via dividends or selling your shares). There is no CGT inside the company itself.
Do I really have to report a property sale within 60 days?
If you’re a UK-resident individual and you sell UK residential property with CGT to pay, yes you must report and pay within 60 days of completion. Non-residents must report all UK property disposals within 60 days, even if there is no tax to pay.
12. What should you do before you accept an offer?
For most landlords, the most expensive mistake isn’t selling at the wrong price, it’s signing the sale contract without understanding the tax.
Before you accept an offer on a rental or second home, it’s worth:
- Running the CGT numbers properly
- Checking whether a Ltd / SPV exit would be better or worse
- Making sure you won’t fall foul of the 60-day rules
That’s where a short, focused CGT planning call pays for itself.
If you’d like to sense-check your numbers for 2025/26 or 2026/27 – whether you hold rentals personally or via a limited company / SPV, book a 20-minute landlord CGT review and we’ll walk through it together, with your actual figures in front of us.