Key facts
- Gains on residential property are taxed at 18% (basic rate) or 24% (higher rate) from 30 October 2024.
- You must file a 60-day CGT property return and pay the tax within 60 days of completion.
- Allowable deductions include purchase price, SDLT, legal fees, and capital improvements (but not maintenance or repairs).
- Mortgage interest cannot be deducted from the capital gain.
- The gain is also reported on your Self Assessment return, with credit for tax already paid via the 60-day return.
CGT on Rental Property: Overview
When you sell a buy-to-let, holiday let, or other rental property that is not your main home, the gain is subject to Capital Gains Tax. Residential property has historically attracted the highest CGT rates, and from 30 October 2024 the rates are 18% and 24%.[4]
Calculating the Gain
The CGT computation follows the standard formula, applied to the property:[1]
| Item | Notes |
|---|---|
| Disposal proceeds | Sale price (or market value if gifted/connected person) |
| Less: acquisition cost | Purchase price |
| Less: purchase costs | SDLT, solicitor fees, survey fees |
| Less: enhancement expenditure | Extensions, conversions, major improvements |
| Less: disposal costs | Estate agent fees, solicitor fees on sale |
| = Gain | Subject to reliefs and Annual Exempt Amount |
Worked Example
Paul bought a buy-to-let flat in 2015 for £180,000, paying £1,200 in stamp duty and £1,800 in legal fees. He spent £12,000 on a new bathroom and rewiring (capital improvement) in 2018. He sells in January 2026 for £270,000, paying £4,500 in estate agent fees and £1,500 in solicitor fees. Paul’s taxable income is £55,000.
| Step | Amount |
|---|---|
| Sale proceeds | £270,000 |
| Less: purchase price | −£180,000 |
| Less: SDLT | −£1,200 |
| Less: legal fees on purchase | −£1,800 |
| Less: improvement expenditure | −£12,000 |
| Less: estate agent fees | −£4,500 |
| Less: solicitor fees on sale | −£1,500 |
| Gain | £69,000 |
| Less: Annual Exempt Amount | −£3,000 |
| Taxable gain | £66,000 |
| CGT at 24% (above basic-rate band) | £15,840 |
60-day deadline: Paul must file a 60-day CGT property return and pay the £15,840 within 60 days of the completion date. He should also include the gain on his Self Assessment return for 2025/26, claiming credit for tax already paid.[2]
What You Can and Cannot Deduct
| Deductible | Not Deductible |
|---|---|
| Purchase price | Mortgage interest / repayments |
| SDLT / LTT on purchase | Buildings insurance |
| Solicitor fees (buy and sell) | Landlord insurance |
| Estate agent fees | Letting agent fees |
| Extensions and conversions | Routine repairs and maintenance |
| New bathroom / kitchen (if upgrade) | Redecoration / painting |
| Survey and valuation fees | Council tax / utility bills |
The 60-Day CGT Property Return
Since 27 October 2021, UK residents must report disposals of UK residential property where CGT is due within 60 days of the completion date.[2]
- File using your HMRC online account (Capital Gains Tax on UK property service)
- You can estimate the gain if you do not yet have exact figures
- Pay any CGT due at the same time
- The gain must also be included on your annual Self Assessment return
- Credit is given for any CGT already paid via the 60-day return
Penalties for late reporting: An initial penalty of £100 applies if the return is up to 6 months late. Additional penalties apply for delays beyond 6 and 12 months. Interest runs on unpaid tax from the 60-day deadline.[2]
Available Reliefs
Several reliefs may reduce or eliminate CGT on a rental property disposal:
- Private Residence Relief (PRR): If the property was your main home for part of the ownership period, PRR may cover some or all of the gain
- Lettings Relief: Very limited since April 2020 — only available if you shared occupation with the tenant
- Capital losses: Losses from other disposals can be offset against the property gain
- Annual Exempt Amount: The first £3,000 of net gains is tax-free
Jointly Owned Properties
If the property is owned jointly (e.g. by a married couple), each owner reports their share of the gain. Each owner has their own Annual Exempt Amount and their own CGT rate band. This can result in a lower total tax bill than if one person owned the property outright.[1]
Frequently Asked Questions
How much CGT do I pay when I sell a buy-to-let property?
The CGT rate on residential property gains is 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. The rate depends on your total taxable income for the year. Gains may be split across both rates if they straddle the basic-rate band.
Do I have to report the sale within 60 days?
Yes. UK residents disposing of UK residential property at a gain must file a 60-day CGT property return and pay any tax due within 60 days of the completion date. Late filing attracts penalties of £100 initially, with further penalties for continued delay.
Can I deduct my mortgage payments from the capital gain?
No. Mortgage interest and capital repayments are financing costs and are not allowable deductions for CGT. For rental properties, mortgage interest may give Income Tax relief (as a basic-rate tax reduction), but it does not reduce the capital gain on sale.
What costs can I deduct when selling a rental property?
You can deduct the original purchase price, stamp duty on purchase, legal fees (buying and selling), estate agent fees, and the cost of capital improvements such as extensions or conversions. You cannot deduct maintenance, repairs, insurance, or letting agent fees.
Further Reading
- The 60-Day CGT Property Report — how to file and what to include
- Private Residence Relief — if the property was once your home
- Lettings Relief — the limited relief for let properties
- Allowable Costs & Deductions — detailed guide to what you can deduct
- Selling a Second Home — holiday homes and second properties
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