How Much Capital Gains Tax Do You Pay When Selling a Rental Property?

Selling a rental property in the UK can generate a significant profit but it also comes with a tax bill that catches many landlords off guard. Capital Gains Tax is one of the most important costs to factor in before you decide to sell and understanding how it works could save you thousands of pounds. If you have already been managing your taxes on rental income carefully then you will know that HMRC keeps a close eye on property profits and selling is no different.


What Is Capital Gains Tax on Property?

Capital Gains Tax is a tax on the profit you make when you sell an asset that has gone up in value. When it comes to residential property, you are taxed on the difference between what you paid for the property and what you sold it for, minus any allowable costs.

It is important to understand that you are not taxed on the full sale price. You are only taxed on the gain.

What Are the Current CGT Rates for Residential Property?

As of the 2025 to 2026 tax year, the Capital Gains Tax rates for residential property in the UK are as follows.

Basic Rate Taxpayers

If your total taxable income including the gain keeps you within the basic rate income tax band, you will pay 18 percent on the gain from a residential property sale.

Higher and Additional Rate Taxpayers

If the gain pushes your total income into the higher or additional rate band, you will pay 24 percent on the portion that exceeds the basic rate threshold.

These rates were updated in the Autumn Budget 2024 and replaced the previous rates of 18 percent and 28 percent respectively. The reduction to 24 percent was a notable change for higher rate taxpayers.

What Costs Can You Deduct?

Before calculating your gain, you can deduct several allowable costs from the sale price including the original purchase price, stamp duty paid at the time of purchase, legal and surveyor fees, the cost of any improvements made to the property and estate agent fees on the sale.

Routine repairs and maintenance costs cannot be deducted as these are revenue expenses rather than capital ones.

The Annual CGT Allowance

Every individual gets an Annual Exempt Amount, which is the amount of gain you can make in a tax year before CGT kicks in. For the 2025 to 2026 tax year this allowance stands at 3,000 pounds. This is significantly lower than it was just a few years ago so do not rely on it to shelter a large portion of your profit.

The 60 Day Reporting Rule

One rule that trips up many landlords is the requirement to report and pay any CGT owed within 60 days of completing the sale of a residential property. Missing this deadline results in automatic penalties from HMRC.

Is Selling Still Worth It?

For many landlords the decision to sell comes down to more than just the tax bill. If you are reviewing your buy to let investment strategy altogether, factoring in CGT early in your planning will help you make a much more informed decision before you commit to selling.

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