Selling a rental property? Your 2026 CGT guide

A steady stream of landlords have been weighing up an exit from the private rented sector this year, as compliance costs, tax changes and the Renters’ Rights Act reshape what it means to let out a property. Recent industry surveys suggest around a quarter of landlords are actively selling or considering it. If you are one of them, there is a tax bill you need to plan for well before you accept an offer: capital gains tax.

CGT on a rental property is one of the most commonly underestimated costs of selling up. Get the numbers wrong, or miss the reporting deadline, and it can turn a straightforward sale into an expensive headache. Here is what you need to know.

Do you actually owe capital gains tax?

If you have let the property out for the whole time you have owned it, and it has never been your main home, the full increase in value from purchase to sale is potentially taxable. There is no automatic exemption for property, unlike your own home.

If you lived in the property at some point, for example you bought it as your home before renting it out, you may be able to claim Private Residence Relief for the period you lived there, plus the final nine months of ownership regardless of whether you were living in it or not. Lettings relief, which used to soften the bill further, was scaled back in 2020 and now only applies if you shared occupancy with your tenant, so most landlords selling a wholly let property will not qualify for it.

How much will you actually pay?

For residential property, individuals pay capital gains tax at 18% on gains that fall within their basic rate income tax band, and 24% on gains above it. Which rate applies depends on your total taxable income for the year, including the gain itself, so a large gain can easily push you into the higher rate even if your regular income is modest.

Every individual has an annual exempt amount, currently £3,000, which is deducted from your gain before tax is calculated. If you own the property jointly, for instance with a spouse or partner, each of you has your own £3,000 allowance and your own rate band, which can meaningfully reduce the combined tax bill compared with owning the property in one name.

What you can deduct from your gain

Your taxable gain is not simply the sale price minus the purchase price. You can deduct:

1. Buying and selling costs: solicitor and conveyancing fees, stamp duty land tax paid on purchase, and estate agent fees on sale.
2. Capital improvements: the cost of an extension, loft conversion, or other work that added lasting value to the property, as opposed to routine repairs or maintenance.
3. Your annual exempt amount: £3,000 per owner, as above.

Mortgage interest is not deductible against capital gains tax. That is a separate income tax relief that applies to your rental profits each year, and the two should not be confused. Keep every invoice for improvement work, since HMRC can ask for evidence and estimates alone will not be accepted.

The 60-day rule: the deadline that catches people out

Unlike other property income, you cannot simply wait and declare a property sale on your annual Self Assessment return. If you have UK residential property gains to report, HMRC requires you to report and pay within 60 days of completion, not the date you exchanged contracts.

In practice, this means:

• Work out your gain in advance. Ideally before you accept an offer, so there are no surprises. An accountant or the HMRC calculator can help.
• Set up a Capital Gains Tax on UK Property account. This is separate from your normal Self Assessment login and needs to be created through GOV.UK before you can report anything.
• Report and pay within 60 days of completion. This is a hard deadline. Interest starts accruing immediately after it passes, and a penalty follows if you are very late.
• Include the disposal on your Self Assessment return too. The 60-day report is not a substitute for declaring the sale on your annual return, where the figures are reconciled against your overall tax position.

Sixty days sounds generous until you are in the middle of a sale, dealing with a chain, removals and everything else that comes with moving. Landlords who get caught out are usually the ones who assumed they had until the following January, as they would with rental income.

Common mistakes that cost landlords money

1. Missing the 60-day deadline. Even a short delay triggers interest, and a £100 penalty applies if you are more than a day late, rising further after three and six months.
2. Forgetting jointly owned allowances. Splitting ownership before a sale, where genuinely appropriate, can use two allowances and two rate bands instead of one.
3. Losing receipts for improvement work. Without evidence, HMRC may disallow the deduction entirely, increasing your taxable gain.
4. Assuming a period living there covers the whole gain. Private Residence Relief only covers the proportion of ownership you actually lived there, plus the final nine months.

Should you sell now or hold on?

There is no universally right answer here, and anyone telling you otherwise is oversimplifying. Some landlords are selling because the compliance workload under the Renters’ Rights Act, on top of existing safety and licensing rules, no longer feels worthwhile for the return. Others are holding on, taking the view that rental demand and yields remain strong in many parts of the country. Both are reasonable positions depending on your circumstances, your mortgage rate, and how hands-on you want to be.

What matters is going in with clear eyes on the tax position, so the number you are picturing in your head matches what actually lands in your account. If your gain is significant, it is worth speaking to an accountant before you list, since timing a sale across two tax years, or transferring a share of ownership to a spouse beforehand, can sometimes reduce the bill legitimately.

The information in this article is intended as general guidance only and does not constitute financial, tax, or legal advice. Tax rules and allowances are subject to change and the information above is correct as of 01/07/2026. Everyone's circumstances are different, so we strongly recommend speaking to a qualified accountant or tax adviser before making any decisions about the sale of a property.