Capital Gains Tax on Buy-to-Let Property Sales (2026-27)

When you sell a buy-to-let property in the UK, any profit you make is subject to Capital Gains Tax (CGT). For the 2026-27 tax year, you'll pay 18% on gains within your basic-rate band and 24% on gains above it—rates that were aligned with standard CGT following the October 2024 Budget. You have just 60 days from completion to report the sale and pay any tax due through a dedicated CGT on UK property return. With an Annual Exempt Amount of only £3,000, most landlords selling investment properties will face a tax bill, so understanding what you can deduct and how to calculate your gain correctly is essential.

What counts as a buy-to-let property for CGT?

A buy-to-let property is any residential property you've owned primarily to rent out to tenants. It doesn't matter whether you bought it specifically as an investment or inherited it and then rented it out—if you haven't lived in it as your main home, it's treated as an investment property for tax purposes.

This is important because buy-to-let properties don't qualify for Private Residence Relief (PPR), the valuable exemption that can eliminate or reduce CGT when you sell your own home. Even if you lived in the property briefly before renting it out, only that period of actual occupation might qualify for partial relief.

Example: Tom bought a flat in 2015 for £180,000, lived in it for two years, then moved out and rented it to tenants for the next nine years. When he sells in 2026, only the two years he lived there (plus certain deemed occupation periods) can qualify for PPR relief. The remaining period is fully taxable.

How to calculate your capital gain

The basic formula is straightforward:

Sale price – Purchase price – Allowable costs = Capital gain

But the detail matters enormously, because getting your allowable costs right can save you thousands.

What you can deduct

Purchase costs:

The original purchase price you paid
Stamp Duty Land Tax you paid when you bought the property
Legal fees and conveyancing costs from the purchase
Estate agent fees if you paid them as a buyer (rare, but possible)
Survey costs

Sale costs:

Estate agent fees and commission
Legal fees and conveyancing costs for the sale
Energy Performance Certificate (EPC) costs if required for the sale

Improvement costs:

Extensions, conservatories, loft conversions
New kitchens or bathrooms (full replacements that improve the property)
Damp-proofing, rewiring, new central heating systems
Landscaping that adds value (not routine gardening)

The key test for improvements is whether the work enhanced the property's value. You must keep receipts and invoices as evidence.

What you cannot deduct

This is where many landlords trip up:

Repairs and maintenance: Repainting, fixing a broken boiler, replacing like-for-like windows, patching the roof—these are revenue expenses that you may have claimed against rental income, but they don't reduce your capital gain. Only improvements count.

Mortgage capital repayments: The fact you've paid down £50,000 of mortgage capital over the years is irrelevant for CGT. You can't deduct it. (You also can't deduct mortgage interest, though you may have claimed tax relief on that against your rental income in earlier years.)

Insurance premiums, letting agent management fees, utility bills: These are running costs, not capital costs.

Your own time or labour: If you did DIY improvements yourself, you can claim the cost of materials but not the value of your time.

Worked example: Basic calculation

Sarah bought a buy-to-let flat in Manchester in 2016 for £150,000. She paid £1,500 in Stamp Duty and £1,200 in legal fees at purchase. In 2020, she spent £8,000 on a loft conversion. In March 2027, she sells for £245,000, paying £3,600 in estate agent fees and £1,000 in legal fees.

Calculation:

Sale price: £245,000
Less purchase price: £150,000
Less purchase costs (SDLT + legal): £2,700
Less improvement (loft): £8,000
Less sale costs (agent + legal): £4,600
Capital gain: £79,700

Sarah's Annual Exempt Amount for 2026-27 is £3,000, so her taxable gain is £76,700.

If Sarah is a basic-rate taxpayer with £15,000 of her basic-rate band remaining, she'll pay:

18% on £15,000 = £2,700
24% on £61,700 = £14,808
Total CGT: £17,508

If Sarah were already a higher-rate taxpayer (or this gain pushes her into higher rate), she'd pay 24% on the entire £76,700 = £18,408.

The 2026-27 CGT rates and thresholds

Following the October 2024 Budget, residential property CGT rates were aligned with standard CGT rates:

18% on gains within your basic-rate income tax band
24% on gains above that threshold

Previously, residential property had its own higher rates (18%/28%), but these were reduced to match other assets like shares.

Annual Exempt Amount: £3,000 for 2026-27. This is the amount of gain you can realise each year tax-free. It's a dramatic reduction from the £12,300 allowance that existed until 2022-23, and it's now the same whether you're an individual or a trust.

Basic-rate band for 2026-27: The basic-rate band runs from £12,571 to £50,270. To work out how much of your gain is taxed at 18% vs 24%, you need to consider your total taxable income first. Your gain is treated as the "top slice" of your income.

Example: James has salary income of £40,000 in 2026-27. His Personal Allowance is £12,570, so his taxable income is £27,430. The basic-rate band ends at £50,270, leaving him £22,840 of basic-rate band available. If his property gain (after the Annual Exempt Amount) is £30,000, he'll pay 18% on the first £22,840 and 24% on the remaining £7,160.

Private Residence Relief and buy-to-let properties

Private Residence Relief (PPR) exempts gains on your main home from CGT. But buy-to-let properties don't qualify—unless you actually lived in the property as your main residence for part of the ownership period.

If you did live in the property at any point, you can claim PPR for:

The actual period of occupation as your main home
The final 9 months of ownership (automatic, even if you weren't living there)

Example: Emma bought a house in 2010 and lived in it as her main home until 2015 (5 years). She then rented it out from 2015 to 2027 (12 years) before selling. She owned it for 17 years total. She can claim PPR relief for 5 years of actual occupation plus the final 9 months, so 5.75 years out of 17. That's approximately 34% of the gain that's exempt.

Letting Relief: mostly abolished

Letting Relief used to provide up to £40,000 of additional relief for landlords who rented out a property that had also been their main home. Since April 2020, this relief only applies if you shared occupation with your tenant—i.e., you lived in the property at the same time as the tenant.

For most buy-to-let landlords who moved out and then rented the property to tenants, Letting Relief is no longer available. It's now only relevant for homeowners who rent out a room while still living in the property.

The 60-day reporting requirement

This is critical and catches many sellers out. When you sell a UK residential property and have a CGT liability (or even if you think you might), you must:

Report the disposal to HMRC using the online CGT on UK property return
Pay the tax due (or make a reasonable estimate)
Do both within 60 days of completion

This is separate from your annual Self Assessment tax return. Even if you've never filed a tax return before, you must register and file this CGT return.

What happens if you miss the deadline?

HMRC charges penalties and interest:

Late filing penalty: £100 if up to 3 months late, then daily penalties
Late payment interest: charged from day 61 onwards on any unpaid tax

You'll still need to report the disposal again on your Self Assessment return for the tax year, but the 60-day return is your immediate obligation.

How to file:

You need a Government Gateway account. Go to GOV.UK and search for "report and pay Capital Gains Tax on UK property." The online service walks you through the calculation and lets you pay immediately by debit card or set up a Direct Debit.

Using capital losses

If you've made losses on other assets (shares, other properties, etc.), you can use these to reduce your taxable gain on the buy-to-let sale.

Same tax year losses: Must be used in the year they arise, even if it means wasting your Annual Exempt Amount.

Losses brought forward: Can be used to reduce gains, but only after you've used your Annual Exempt Amount for the current year.

Example: You have a £10,000 loss from selling shares in 2025-26. In 2026-27, you sell a buy-to-let with a £25,000 gain. You first deduct your £3,000 Annual Exempt Amount (leaving £22,000), then deduct the £10,000 loss, leaving £12,000 taxable.

Losses on residential property can be set against gains on any assets—they're not restricted to property-only.

If you don't use a loss, it carries forward indefinitely until you do. But you must claim it—losses don't apply automatically.

Common mistakes

Forgetting the 60-day deadline: This is the single biggest trap. Many landlords assume they can wait until the normal Self Assessment deadline (31 January following the tax year). You can't. Mark your completion date and set a reminder for 50 days later.

Deducting repairs as improvements: Replacing a broken boiler with a new one is a repair. Installing central heating where there was none before is an improvement. Keep detailed records and be honest about the distinction.

Not keeping purchase paperwork: If you bought the property 15 or 20 years ago, you need those original purchase documents. If you've lost them, contact your solicitor or mortgage lender—they may have copies.

Assuming mortgage capital reduces the gain: It doesn't. The mortgage is irrelevant to the CGT calculation (though it obviously affects your net cash proceeds).

Claiming Letting Relief when you didn't share occupation: Since 2020, this relief is very limited. Don't assume you qualify.

Forgetting to claim all allowable costs: Did you pay for surveys, EPCs, planning permission for that extension? These can all be deducted if you have evidence.

Not considering the timing: If you're on the cusp of basic and higher rate, the timing of the sale within the tax year can matter. Selling early in the tax year (April) vs late (March) might affect which rate applies if your income varies.

Joint ownership

If you own the property jointly (typically with a spouse or partner), the gain is normally split 50/50, and each owner gets their own £3,000 Annual Exempt Amount.

Example: A jointly-owned property produces a £50,000 gain. Each owner has a £25,000 gain, deducts their own £3,000 exemption, leaving £22,000 each taxable. If both are higher-rate taxpayers, each pays £5,280 (24% of £22,000), total £10,560.

Married couples and civil partners can elect to split ownership in a different ratio if the actual beneficial ownership differs from 50/50, but this requires a formal declaration to HMRC [Form 17].

What about non-UK residents?

If you're not UK resident when you sell, different rules apply. Non-residents have been liable for CGT on UK property since April 2015 (previously they weren't). The rates and reporting requirements are similar, but there are additional complexities around rebasing and the period of ownership. This guide focuses on UK residents—if you're non-resident, seek specialist advice.

Record-keeping

Keep all records for at least 5 years after the 31 January Self Assessment deadline following the tax year of sale. That means if you sell in 2026-27, keep records until at least January 2033.

Essential documents:

Purchase contract and completion statement
Sale contract and completion statement
All invoices for improvements (not repairs)
Evidence of purchase and sale costs (solicitor bills, agent invoices)
Mortgage statements (to show you didn't deduct capital, if HMRC queries it)
Photos of improvement works (helpful if HMRC challenges whether something was an improvement)

What to do next

If you're planning to sell a buy-to-let:

Start gathering your paperwork now. Calculate a rough estimate of your gain so you know what tax to expect. Consider whether the timing of the sale affects your income tax position.

If you've already sold and the 60-day deadline is approaching:

Don't panic, but act quickly. Register for the CGT on UK property service on GOV.UK if you haven't already. If you're unsure about the calculation, make a reasonable estimate and pay it—you can correct it later on your Self Assessment return if needed. It's better to overpay slightly and get a refund than to underpay and face interest charges.

If you've missed the 60-day deadline:

File the return as soon as possible. HMRC's penalties increase the longer you delay. You may be able to appeal penalties if you have a reasonable excuse (serious illness, bereavement, etc.), but "I didn't know" generally isn't accepted.

For complex situations:

If your property was partly your main home, if you've made substantial improvements, if you're splitting ownership in non-standard ways, or if you have losses to offset, the calculation gets more intricate.

AI Tax chat can answer specific questions about your situation and help you understand which expenses you can claim. For full end-to-end handling—including filing the 60-day return, calculating the exact tax, and managing your Self Assessment—AI Accountant can take care of everything, ensuring you meet the deadline and claim every allowable deduction.

The key is not to leave it until the last minute. CGT on property sales is one area where HMRC is strict about deadlines, and with the Annual Exempt Amount now just £3,000, most buy-to-let sales will trigger a tax bill. Plan ahead, keep good records, and make sure you report and pay on time.

CGT on Buy-to-Let Property Sales (2026-27)