What Tax Do I Pay When I Sell a Rental Property in the UK?

When you sell a rental property in the UK, the main tax you face is Capital Gains Tax (CGT) on the profit, not income tax. This catches a lot of landlords out, because the income tax you paid on rent each year is a separate matter and does not reduce the bill when you sell. CGT applies to the gain, broadly the difference between what you sell for and what the property cost you, after deducting your allowable costs and any reliefs.

There is also a tight reporting clock. If tax is due and you are a UK resident, you must report the sale and pay the CGT within 60 days of completion. Get the gain wrong, or miss that window, and you can face a penalty even when the eventual tax is modest. What you actually pay comes down to three things: the income tax you paid on rent during ownership, the CGT on the sale itself, and the 60-day return that carries it to HMRC.

The three things to understand before you sell

Most of the costly mistakes come from mixing up taxes that fall due at different stages, each with its own deadline. Keep them apart and the rest follows.

Stage	What it is	When it applies	Headline rates (2026/27)	Deadline
Income tax during ownership	Tax on your rental profit (rent minus allowable expenses)	Every tax year you let the property	20% / 40% / 45%, with the Section 24 finance-cost credit at 20%	Self Assessment by 31 January after the tax year
Capital Gains Tax on disposal	Tax on the gain when you sell or otherwise dispose of the property	In the tax year you sell	18% (basic rate band) / 24% (higher rate band)	Report and pay within 60 days of completion (where tax is due)
The 60-day return	HMRC's UK property disposal return, separate from Self Assessment	On completion of the sale	Same 18% / 24% CGT rates	60 days from completion

The first row, income tax on rent, stops mattering once you sell. The Section 24 mortgage-interest rules govern how that rental profit is taxed during ownership, and you can read how those work in our guide to claiming mortgage interest under Section 24. The CGT on the sale and the 60-day return are where the money and the deadlines actually bite.

Capital Gains Tax when you sell a rental property

For the 2026/27 tax year, CGT on residential property is charged at:

• 18% on the part of the gain that falls within your unused basic rate band; and
• 24% on the part that falls into the higher rate band.

These rates have applied since 30 October 2024 and sit in the Taxation of Chargeable Gains Act 1992 (TCGA 1992 s.1H, with s.1I allocating the gain across your bands). Your rate is not fixed by what you earn from the property; it depends on your total income plus the gain in the year of sale. The gain stacks on top of your income, so a gain that starts in the basic rate band can be pushed partly into the higher band and taxed at 24% on that portion.

You also have an annual exempt amount (AEA) of £3,000 for 2026/27. The first £3,000 of your total gains across all disposals in the year is tax-free. For the full rates and allowances picture, see our CGT rates and allowances guide and the 2026/27 rates explained. You can cross-check the headline figures on the government's own Capital Gains Tax pages.

How the gain is calculated

The basic shape of the calculation is straightforward:

Sale price − purchase price − allowable costs − reliefs = chargeable gain

You then deduct your £3,000 annual exemption to reach the taxable gain. Allowable costs reduce the gain, so keeping evidence of them is what protects you from overpaying.

Allowable costs include

• Purchase costs: the price you paid, plus Stamp Duty Land Tax, legal fees and survey fees on the way in.
• Capital improvements: works that add to the property such as an extension, a loft conversion or a new kitchen where none existed. Repairs and routine maintenance do not count (those are income-tax expenses against the rent).
• Selling costs: estate agent fees, conveyancing and any advertising directly linked to the sale.

Worked example

Say you sell a buy-to-let flat for £350,000. You bought it for £250,000, paid £8,000 in purchase costs, spent £15,000 on a loft conversion while you owned it, and paid £7,000 in selling costs. Your gain works out as follows:

• Sale price: £350,000
• Less original cost (£250,000) + purchase costs (£8,000) + improvement (£15,000) + selling costs (£7,000) = £280,000
• Gain: £70,000
• Less annual exemption: £3,000
• Taxable gain: £67,000

If the whole of that taxable gain falls in the higher rate band, the CGT is £67,000 × 24% = £16,080. If part of your basic rate band is unused, some of the gain would instead be taxed at 18%, lowering the bill. For a full step-by-step walkthrough, including band-stacking and joint ownership, see our step-by-step CGT calculation guide and the buy-to-let calculation guide.

Private Residence Relief if you ever lived there

If the property was at some point your only or main home, Private Residence Relief (PRR) can remove part of the gain. PRR (TCGA 1992 ss.222–223) exempts the gain for the periods you actually lived there as your main residence, plus the final 9 months of ownership, regardless of how the property was used in those last months.

The relief is apportioned by time. If you owned a property for 10 years, lived in it for the first 3 years and let it for the remaining 7, you would get relief for those 3 years plus the final 9 months. Only the balance of the ownership period is chargeable. The detail, including job-related deemed occupation and electing between two homes, is covered in our guide to Private Residence Relief for landlords.

Lettings Relief, restricted since April 2020

Lettings Relief used to give up to £40,000 of additional relief on a former home that had been let. That changed on 6 April 2020. Under TCGA 1992 s.223B (inserted by Finance Act 2020), the relief is now available only where you shared occupation of the property with your tenant during the let period. In the common situation where you moved out and then let the whole property, Lettings Relief no longer applies. PRR and the final 9 months can still reduce the gain, but the old £40,000 lettings allowance is off the table for most landlords.

Using capital losses

If you sell a property for less than its base cost you have an allowable capital loss rather than a gain. You set losses first against gains of the same tax year, and you can carry forward indefinitely any unused balance against future gains, provided you report the loss to HMRC (there is a time limit for claiming losses, generally four years from the end of the tax year of the loss). Unused losses from earlier disposals can materially cut the CGT when you sell. In the current year, losses come off after the annual exemption, so you do not waste a loss covering a gain the £3,000 exemption would have sheltered anyway.

Reporting and paying: the 60-day return

CGT on UK residential property has its own fast reporting route, separate from Self Assessment. If you are a UK resident and there is CGT to pay, you must report the disposal and pay the tax within 60 days of completion using HMRC's UK property disposal return.

Two points trip people up. First, if the gain is fully covered by PRR, losses or the annual exemption so that no CGT is due, a UK resident does not need to file the 60-day return. Second, non-residents face a stricter rule and must file for every disposal regardless of tax due. Missing the 60-day deadline can trigger penalties even where the eventual tax is small, so the safe approach is to work out the gain early in the sale process. Our guide to CGT payment deadlines on property sales sets out the timing and penalty detail.

Selling through a company or as a non-resident

Company-owned properties

If the rental property is held in a limited company, the company does not pay CGT at all. Instead the company pays Corporation Tax on its chargeable gains. The gain is computed using the capital gains rules but is brought into the Corporation Tax charge and taxed at Corporation Tax rates: a 19% small profits rate on profits up to £50,000, a 25% main rate on profits above £250,000, and marginal relief tapering between the two. Companies whose business is mainly holding investments (close investment-holding companies under CTA 2010 s.18N) pay the 25% main rate regardless of the level of profit.

There is usually a second layer to think about: extracting the sale proceeds from the company to you personally, for example as dividends or salary, is a further taxable event. So the headline company rate is rarely the whole story. Our complete guide to buy-to-let limited companies explains how the two layers interact and when incorporation does and does not help.

Non-resident landlords

If you have moved abroad, you still pay UK tax when you sell UK property. Non-resident Capital Gains Tax (NRCGT) applies to disposals of UK land under TCGA 1992 s.1A and Schedules 1A, 1B and 4AA (the regime was rewritten by Finance Act 2019; older guidance citing ss.14B to 14H is out of date). The rates match the resident rates, 18% and 24% on residential property.

Two features matter for non-residents:

• Reporting: you must file the 60-day UK property disposal return for every UK land disposal, even when no tax is due. This is stricter than the resident rule.
• Rebasing: the gain is normally measured from the property's market value at 5 April 2015 for residential property (or 5 April 2019 for non-residential land), so only the growth since then is usually taxed. Alternative bases (straight-line apportionment or the whole historic gain) can be elected where they give a better result.

You may also need to consider any double taxation treaty between the UK and your country of residence, and the temporary non-residence rules, which can recapture gains if you return to the UK within a few years of leaving. There is more on that in our guide to temporary non-residence and the 5-year CGT recapture.

Planning to reduce the CGT on a sale

None of the following is a loophole; each is a recognised feature of the rules. The right combination depends on your circumstances, and some steps must happen before completion to work at all.

Use the annual exemption, and time the disposal

Each individual has a £3,000 annual exemption. If you are selling more than one asset, or can split a disposal across two tax years (for example by completing one sale in late March and another in early April), you can use two years of exemptions instead of one. Where you own the property jointly, each owner applies their own £3,000 to their share. For the detail on the allowance see our 2026/27 rates and allowances explainer.

Transfer a share to your spouse or civil partner

Transfers between spouses or civil partners who live together happen on a no-gain, no-loss basis under TCGA 1992 s.58. The receiving spouse takes over the original base cost, so the transfer itself triggers no CGT. Done before sale, this lets a couple use both annual exemptions and shift more of the gain to whichever spouse has spare basic rate band, so more of it is taxed at 18% rather than 24%. After separation, a 3-year window for no-gain, no-loss treatment applies (extended by Finance (No. 2) Act 2023 s.41), and transfers in line with a court order or formal separation agreement also qualify. Timing and documentation matter, so take advice before transferring.

Incorporation before sale

You might be weighing up moving a portfolio into a company before selling. CGT on the transfer in can sometimes be deferred under Section 162 incorporation relief (TCGA 1992 s.162), but only where the letting activity amounts to a genuine business (HMRC looks for an actively managed portfolio, following the approach in Ramsay v HMRC), and the transfer itself can trigger Stamp Duty Land Tax. Incorporation is rarely a quick fix for a single sale and needs careful modelling. The buy-to-let limited company guide sets out when it is worth exploring.

Records to keep

Good records are what let you claim every cost and relief, and what protect you if HMRC asks questions. Keep:

• the original purchase documents and completion statement, showing price and buying costs;
• invoices and receipts for capital improvements (kept separate from repair receipts, which are income-tax items);
• the sale documents and selling costs;
• evidence of any period you lived in the property as your main home, to support a PRR claim.

HMRC can usually enquire into a return for up to 4 years after the relevant filing deadline, and longer where a return is careless or deliberate, so retaining the full paper trail well beyond the sale is sensible.

The April 2027 change, and why it does not affect your sale

From 6 April 2027, separate property income tax rates of 22% (basic), 42% (higher) and 47% (additional) take effect for property income in England and Northern Ireland. These were announced at the Autumn Budget 2025 and are now enacted law under the Finance Act 2026 (c.11, Royal Assent 18 March 2026), at ss.6 and 7. Scotland and Wales set their own property income rates (FA 2026 s.8 and Schedule 2).

The key point for anyone selling: this is an income tax change that affects how rental profits are taxed during ownership. It does not change Capital Gains Tax on a disposal. Selling a rental property is a CGT event, and the CGT rates remain 18% and 24% for residential property. If you want the detail on how the income tax change works for landlords, see our guide to the 2027 property income tax rates. For the complete policy picture on disposals, our complete guide to CGT on property pulls the rates, reliefs and reporting together in one place.

When to get specialist advice

Plenty of straightforward sales can be handled without help, but professional advice tends to pay for itself where any of these apply:

• the property was once your main home, so PRR apportionment is in play;
• you are weighing up incorporation before sale;
• ownership is shared, held in trust, or you want to use a spousal transfer;
• you are now non-resident, or were for part of the ownership period;
• you have capital losses to bring into the picture.

A specialist property accountant can confirm the gain, check the 60-day reporting position and model the planning options while there is still time to act, before you complete rather than after.