Selling a buy-to-let in the 2026–27 tax year? The Capital Gains Tax (CGT) rules for UK residential property changed materially between 2023 and 2024. Get them right and you have a clean exit; get them wrong and you face a painful HMRC bill plus penalties.
Three headline facts every landlord needs to know for 2026:
- 1CGT rates on residential property: 18% for gains in the basic-rate band, 24% for gains in the higher-rate band (reduced from 28% on 6 April 2024)
- 2Annual exempt amount: only £3,000 per person for 2026–27 (halved from £6,000 in 2023–24)
- 360-day reporting rule: you must report and pay CGT within 60 days of completion, using HMRC’s online Capital Gains Tax on UK property account
This is the complete 2026 guide: how to calculate the gain, which reliefs apply, how to report, and realistic planning moves to reduce the bill.
Disclaimer: this is editorial guidance, not personal tax advice. Every CGT scenario is different, so use a qualified tax adviser for material disposals.
How CGT on residential property works in 2026
The basic formula
Gain = Sale price − Purchase price − Allowable costs − Reliefs − Annual exempt amount
Allowable costs include:
- Stamp Duty Land Tax on purchase (the 3% / 5% surcharge counts too)
- Legal and conveyancing fees (buy and sell)
- Estate-agent sale fees
- Capital improvements (new kitchen / bathroom / extension), but not repairs
- Survey and valuation fees
Not allowable:
- Mortgage interest (for individual landlords it only earns a 20% tax credit against rental income tax, 22% from 2027–28)
- Repairs and redecoration
- Ordinary maintenance
CGT rates 2026–27
| Taxable income + gain band | Rate on residential property gain |
|---|---|
| Basic-rate (up to £50,270) | 18% |
| Higher-rate (£50,271–£125,140) | 24% |
| Additional rate (£125,140+) | 24% |
Note: the gain is added to your taxable income to work out which band each slice falls in. A typical higher-rate landlord pays 24% on most of the gain.
The shrinking allowance
The annual exempt amount has been cut aggressively:
- 2022–23: £12,300
- 2023–24: £6,000
- 2024–25 onwards: £3,000
For married couples / civil partners, two allowances are available if the property is jointly owned (or transferred beforehand, as covered under planning below).
Every allowable cost above has to be evidenced when you sell, often years after you paid it. From £7.99 a month, LetCompliance records each cost against its property as the let runs, with a repair kept apart from a capital improvement and the invoice attached. Get started
Worked example: typical higher-rate landlord sale
Scenario: You bought a BTL for £180,000 in 2014, before the stamp duty change on 4 December 2014, and sell in June 2026 for £320,000.
Costs breakdown:
| Item | Amount |
|---|---|
| Sale price | £320,000 |
| Purchase price | (£180,000) |
| SDLT on purchase (1% of the price) | (£1,800) |
| Legal fees (both sides) | (£2,800) |
| Estate agent sale fee (1.5%) | (£4,800) |
| New kitchen 2019 (capital improvement) | (£8,000) |
| Gross gain | £122,600 |
| Annual exempt amount | (£3,000) |
| Taxable gain | £119,600 |
Tax calculation (higher-rate taxpayer, all at 24%):
£119,600 × 24% = £28,704 CGT due
Key points:
- If you had sold in 2022–23 with the £12,300 allowance and the old 28% rate, CGT would have been £30,884 on the same gain
- Split the property with a spouse beforehand (see planning) and you double the allowance and potentially use two basic-rate bands
Private Residence Relief (PRR)
If you lived in the property as your main residence at any point during ownership, you can claim Private Residence Relief for that period.
How PRR works
Relief = (Period of main residence + final 9 months) ÷ Total ownership period × Gain
Worked example
- Owned 2010–2026 (192 months)
- Lived in it 2010–2014 (48 months) before letting
- Gross gain £122,600
Qualifying period for PRR: 48 months lived-in + 9 final months = 57 months
PRR relief = 57 / 192 × £122,600 = £36,397
Taxable gain after PRR = £122,600 − £36,397 − £3,000 allowance = £83,203
CGT (higher-rate) = £19,969
PRR alone saved £8,735.
Letting Relief (restricted since 2020)
Letting Relief was dramatically cut in 2020. It now only applies where you shared occupation with the tenant (e.g., a lodger in your own home). For most landlords Letting Relief no longer applies to standard BTL sales where you moved out completely.
The 60-day reporting rule (critical)
Since 27 October 2021, you must:
- 1Report the disposal within 60 days of completion (not exchange) using HMRC’s online Capital Gains Tax on UK property account
- 2Pay an estimate of the CGT within the same 60-day window
- 3Also include the disposal on your annual Self Assessment (for final reconciliation)
Access: gov.uk/report-and-pay-your-capital-gains-tax. Sign in with your Government Gateway ID.
Penalties for missing the 60-day rule
| Days late | Penalty |
|---|---|
| 1 day | £100 fixed |
| 3 months | £100 + daily penalty up to £900 |
| 6 months | Further 5% of tax due (min £300) |
| 12 months | Another 5% of tax due (min £300) |
Plus interest on late-paid tax at HMRC’s prevailing rate (~7.75% in spring 2026).
Moral: do not miss this window. Most conveyancers will flag it on completion, but you, the seller, remain legally responsible.
CGT planning moves landlords actually use
1. Transfer a share to spouse before sale
Transfers between spouses / civil partners are no-gain / no-loss for CGT. Before sale, you can transfer up to 50% (or any proportion) so that:
- Both partners use their £3,000 annual exempt amount (£6,000 total)
- If one spouse is a basic-rate taxpayer, a slice of the gain is taxed at 18% rather than 24%
This must happen well before completion and ideally through a proper deed of trust or Land Registry transfer. Speak to a solicitor and tax adviser first, because HMRC tests the timing.
2. Offset capital losses
Capital losses from other disposals (shares, other property) can be set against the BTL gain. Losses not used in the current year carry forward indefinitely.
3. Make a pension contribution before the sale
Pension contributions (and Gift Aid donations) extend your basic-rate band, potentially moving a slice of the gain from 24% to 18%. ISA payments don’t extend the band. A £10,000 gross pension contribution could save £600 of CGT if it shifts £10,000 of gain into basic rate.
4. Consider incorporation (before sale)
If you have multiple BTLs and are considering a limited company, incorporation relief (s.162 TCGA 1992) may defer the gain, but it’s complex (needs a genuine business, SDLT implications, lender cooperation) and only works for serious portfolios. Always take specialist advice.
5. Time the sale
If you’re borderline between basic and higher-rate in a given year, delaying or accelerating by a tax year can save ~6% on a slice of the gain.
FAQs
Is the CGT annual exempt amount really only £3,000 in 2026?
Yes. From 6 April 2024 onwards the allowance is £3,000 per person per year. It applies across all CGT disposals, not just property.
What date do I use for CGT: exchange or completion?
Exchange of contracts is the disposal date for CGT. The 60-day report / payment window runs from completion, which is the bit people miss when exchange and completion are in different months.
Do I pay CGT if the property is in a limited company?
No. Limited companies pay corporation tax (19–25% in 2026) on the chargeable gain, not CGT. No 60-day rule and no annual exempt amount for companies. Indexation allowance frozen at December 2017 may still apply on older assets.
Can I gift the property to my children without CGT?
No. A gift is treated as a deemed disposal at market value. You’ll pay CGT as if you’d sold. The only exceptions are spouse transfers (above) and charity gifts.
Do I pay CGT if I sell at a loss?
No, but report the loss so you can use it against future gains. You must claim the loss within 4 years of the end of the tax year in which it arose.
Where to go next
- Buy-to-let tax UK 2026: the rental income tax rules
- MTD ITSA for landlords 2026: quarterly HMRC reporting, now live
- Landlord mortgage rates UK 2026: remortgage or sell?
Get started. The figures a sale needs build up over the years you let the property, and they are hard to rebuild at the end. LetCompliance keeps them with the property as you go: capital costs and conveyancing documents on the property record, profit and loss per property, Section 24 and CGT calculators, and an SA105 tax pack to export for your accountant.
Sources and scope
- HMRC: Capital Gains Tax on UK property (report & pay)
- HMRC: CGT rates and allowances
- HMRC: Private Residence Relief (HS283)
- HMRC: Letting Relief
- Legislation: Taxation of Chargeable Gains Act 1992
Every figure on this page is cited to GOV.UK, legislation.gov.uk or HSE and reviewed against the live source every quarter. This is guidance, not individual legal advice.
Allowable vs Capital Repair Decision Tree
The single line HMRC actually draws between an allowable repair and a capital improvement, with 24 worked examples for UK landlords.
- 24 real repair scenarios classified
- Repair-vs-capital decision tree (1-page A4)
- Replacement-of-domestic-items relief explained
- Self Assessment line mapping for SA105
Frequently asked questions
What are CGT rates on residential property for landlords in 2026?
For residential property disposals from 6 April 2024, the rates are 18% for gains within your basic-rate band and 24% for gains in the higher-rate band (reduced from 28% previously). The annual exempt amount is £3,000 per person (halved from £6,000 in 2023–24). These rates apply to most UK buy-to-let sales in the 2026–27 tax year.
What is the 60-day CGT reporting rule?
Since 27 October 2021, you must report and pay CGT on UK residential property disposals within 60 days of completion, using HMRC’s online Capital Gains Tax on UK property account. Missing the deadline triggers £100 immediate penalty, further daily penalties after 3 months, and interest on unpaid tax. You still declare the disposal on your annual Self Assessment too.
Does Private Residence Relief apply to a let property I once lived in?
Partially. If you lived in the property as your main residence for part of the ownership period, you get full PRR for that period plus the final 9 months. The let period is taxable unless Letting Relief applies (now restricted to shared occupation only). Calculations use a time-apportioned fraction of the gain. Get an accountant to run the figures, because a mistake here costs thousands.
Can I offset BTL losses against CGT?
Capital losses on other property sales can be offset against the gain, either in the same year or carried forward. Rental losses (income-tax losses) cannot be offset against capital gains: they stay in the rental property business. Indexation / inflation relief is not available to individuals (abolished in 2008), but incidental costs of purchase and sale (SDLT, legal fees, estate-agent fees, capital improvements) reduce the gain.
