How capital gains tax works on a rental
When you sell a property you've let out, you pay capital gains tax on the gain: the sale price, less selling costs, less what you paid and what you've spent improving it. Everyone gets a £3,000 tax-free allowance each tax year. The rest is taxed at 18% where it fits inside your unused basic rate band, and 24% above that.
You must report the sale to HMRC and pay the tax within 60 days of completion, using a separate capital gains tax property return. Don't wait for your usual Self Assessment.
Worked example
A landlord earning £45,000 bought a flat for £185,000 including fees, spent £10,000 on improvements and sells for £300,000 with £6,000 of selling costs. The gain is £99,000. After the £3,000 allowance, £96,000 is taxable. Their salary and £13,000 of rental profit use up all of their basic rate band, so the whole £96,000 is taxed at 24%: a bill of £23,040.
Owned 50/50 with a spouse earning £20,000, each has half the gain and their own £3,000 allowance, and about half of the spouse's share falls in the 18% band. The bill drops to £20,894, a saving of about £2,100.
Things that change the answer
- Did you ever live there? Private residence relief can remove part of the gain. This calculator doesn't include it.
- Timing. Selling just after 6 April gives you a new allowance and, if your income is lower that year, more room in the 18% band.
- Tenants in place. Under the Renters' Rights Act you can end a tenancy to sell, but not in the first year of the tenancy, and you must give four months' notice. Selling with the tenant in place can be quicker but usually gets a lower price.
- The new tax rates. From April 2027, rental profit is taxed at 22%, 42% and 47%. Use the Section 24 calculator to see what that does to keeping it.
Keeping the property? It stays in your estate for inheritance tax. Check your inheritance tax.
Questions landlords ask
When do I pay capital gains tax on a rental property?
Within 60 days of completion. You report it with HMRC's capital gains tax on UK property service and pay at the same time. If you're in Self Assessment, you include it on your return too, and any amount already paid is credited.
Can I reduce capital gains tax on a buy-to-let?
Make sure you include all buying and selling costs and improvements. Using both spouses' allowances and basic rate bands helps, and selling in a year when your income is lower keeps more of the gain at 18%. Moving a share to a spouse before the sale is usually tax-free between you, but get advice first.
Do I pay capital gains tax if I sell at a loss?
No. You can report the loss and set it against other gains in the same or future years.
Is the 18% rate for basic-rate taxpayers only?
18% applies to the part of the gain that fits inside your unused basic rate band, after your income is counted. Higher-rate taxpayers pay 24% on all of it.
Sources
Last updated 1 October 2026.