Capital Gains Tax on Rental Property: A UK Landlord's Guide

When you sell a rental property for more than you paid, you'll likely owe Capital Gains Tax (CGT). Since 30 October 2024 the main CGT rates are the same for residential property and most other assets: 18% within the basic-rate band and 24% above it. What is specific to property is that a UK residential sale must be reported and the tax paid within 60 days of completion.

Current CGT rates on property

• Basic rate taxpayers: 18% on gains within the basic rate band
• Higher rate taxpayers: 24% on gains above the basic rate band
• Annual exempt amount: £3,000 (2025/26) — this is the tax-free allowance per person per year

How to calculate your gain

1. Sale price minus selling costs (estate agent fees, legal fees, EPC)
2. Minus purchase price and buying costs (stamp duty, legal fees, survey)
3. Minus allowable improvements (not repairs — improvements that add value)
4. Minus annual exempt amount (£3,000)
5. The remainder is your taxable gain

What counts as an improvement?

An improvement is capital expenditure that enhances the property beyond its original state. Examples include adding an extension, converting a loft, installing central heating for the first time, or creating new window openings. Replacing single glazing with double glazing is normally treated as a repair, because it is the modern equivalent.

Repairs and maintenance (even expensive ones like a new boiler replacing an old one) are not improvements for CGT purposes — but they may be deductible against rental income.

Available reliefs

Private Residence Relief (PRR)

If you lived in the property at any point, you may qualify for partial PRR. The final 9 months of ownership are always exempt if the property was your main residence at any time.

Letting Relief

If you qualify for PRR and also let the property, you may get additional relief of up to £40,000. This only applies if you shared the property with your tenant (e.g., renting a room).

Transferring between spouses

Transfers between married couples and civil partners are CGT-free. This can be used to optimise which partner sells, based on their tax rate and available exempt amount.

Reporting and payment deadlines

You must report the sale to HMRC and pay CGT within 60 days of completion. This is separate from your annual self-assessment. Late reporting incurs penalties and interest.

How Tendmere helps

Keep purchase costs, capital improvements and selling costs separate from your rental expenses. Tendmere’s expense categories are for rental income and flow into income and MTD totals, so do not record capital costs there. Store the invoices in your documents instead, so you have them for your CGT calculation.