You have found a buyer for one of your rentals, the sale is close to completing, and one question keeps nagging: how much of the profit goes to HMRC, and when do you actually have to hand it over?
Capital gains tax (CGT) on a buy-to-let is more generous than a lot of landlords fear, and stricter on timing than most expect. Here is how the rates, the reliefs and the 60-day clock work, run through on a real gain.
The two rates: 18% and 24%
CGT on residential property has its own rates, higher than those on shares or most other assets. Since 6 April 2024 they are:
- 18% on any part of the gain that falls within your unused basic-rate income tax band
- 24% on the rest
The higher rate was cut from 28% to 24% from 6 April 2024; the 18% rate is unchanged. Source: gov.uk CGT rates.
The gain sits on top of your income for the year. Work out your taxable income first, see how much of the basic-rate band is left, and that slice of the gain is taxed at 18%. Everything above it is taxed at 24%.
What actually counts as your gain
Your gain is not simply sale price minus purchase price. You can deduct:
- what you paid for the property
- the costs of buying (stamp duty, solicitor, survey)
- the costs of selling (estate agent, solicitor)
- money spent on capital improvements, such as an extension or a first kitchen, but not repairs or maintenance, which are income-tax expenses instead
You also get the annual exempt amount, the slice of gains that is tax-free each year. For 2025-26 it is £3,000 per person, down from £6,000 the year before. Source: gov.uk.
Relief if the property was once your home
This is where a lot of landlords are pleasantly surprised. If you lived in the property as your only or main home at any point, Private Residence Relief (PRR) exempts a proportion of the gain, based on how long it was your home.
The final nine months are free too
PRR also covers the final nine months of ownership, whether or not you were living there, as long as the property was your main home at some point. So the months you occupied it, plus the last nine months, come out of the taxable gain.
What about lettings relief?
Lettings relief used to soften the bill on a former home that was later let. Since 6 April 2020 it only applies where you were living in the property at the same time as your tenant, a lodger arrangement in effect. If you moved out and let the whole place, which is the usual buy-to-let story, you will not get it. Source: gov.uk HS283.
A worked example
Priya bought a house in June 2014 for £180,000, with £5,000 of buying costs. She lived in it as her main home for the first three years, then let it out. She sells in June 2026 for £330,000, paying £5,000 in estate agent and solicitor fees.
Her gain before relief:
| Item | Amount |
|---|---|
| Sale price | £330,000 |
| Less selling costs | −£5,000 |
| Less purchase price | −£180,000 |
| Less buying costs | −£5,000 |
| Gain before relief | £140,000 |
She owned it for 12 years (144 months). It was her home for 36 months, and PRR adds the final 9 months, so 45 months qualify.
- PRR = £140,000 × 45/144 = £43,750
- Gain after PRR = £140,000 − £43,750 = £96,250
- Less annual exempt amount = −£3,000
- Taxable gain = £93,250
If Priya is a higher-rate taxpayer, the whole £93,250 is taxed at 24%, giving £22,380.
If instead £8,000 of her basic-rate band were unused, that £8,000 slice would be taxed at 18% (£1,440) and the remaining £85,250 at 24% (£20,460), a total of £21,900.
Had she never lived there, there would be no PRR, and the full £140,000 (less the £3,000 allowance) would be taxable: roughly £32,880 at 24%. The years she spent living in the house saved her around £10,500.
The 60-day deadline
Here is the part that catches people out. When you sell a UK residential property and CGT is due, you must report the sale and pay the tax within 60 days of completion, not at the end of the tax year.
You do it through a "Capital Gains Tax on UK property account" on gov.uk. Miss the deadline and there is an automatic £100 penalty, with more added if it drags on, plus interest on the unpaid tax. Source: gov.uk report and pay.
If you also file a Self Assessment return, you still include the disposal there, and the 60-day payment counts towards the final bill.
Legitimate ways to trim the bill
A few things worth planning before you exchange:
- Use both partners' allowances and bands. Transfers between spouses or civil partners are free of CGT, so owning jointly can double the annual exempt amount and use two basic-rate bands. Arrange it well before the sale and take advice.
- Mind the completion date. A sale completing on 6 April rather than 5 April pushes the gain into the next tax year, which can help if this year's income is unusually high.
- Keep every receipt. Improvement costs and buying or selling fees only reduce the gain if you can evidence them.
CGT on property is one of the larger, and most predictable, costs a landlord faces. Knowing the 18/24 split, checking whether any period as your own home applies, and diarising the 60-day deadline the moment you exchange will save you both money and a penalty.
This is general information, not tax or financial advice. CGT interacts with your wider income and circumstances, so check the current gov.uk guidance or speak to an accountant before you sell.
