Capital Gains Tax on a buy-to-let property is charged at 18% or 24% on the profit you make when you sell, gift, or otherwise transfer it, with only the first £3,000 of gains in the 2025–26 tax year tax-free. Which rate applies depends on your income, and the tax must be reported and paid within 60 days of completion. Miss that window and penalties start automatically.
The Rates for 2025–26
From 6 April 2025, basic rate taxpayers pay 18% on residential property gains and higher or additional rate taxpayers pay 24%.1GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances The rate isn’t fixed by your usual tax band alone. You stack the gain on top of your taxable income for the year, and it can end up split between the two rates.
To work out where you sit, subtract your Personal Allowance and any Income Tax reliefs from your income, then add the taxable gain (the gain after the £3,000 annual exempt amount). If the total stays within the basic rate band, which ends at £50,270 for 2025–26, the whole gain is taxed at 18%. If it crosses that threshold, the portion above £50,270 is taxed at 24% and the rest at 18%.1GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances
A single large gain on a rental property will very often push a basic-rate landlord into the higher band for part of the calculation, so both rates end up in play on the same disposal.
Working Out the Gain
The gain is your sale proceeds minus your base cost, and the base cost is the original purchase price plus allowable expenditure over the life of the property. Three categories of cost can be deducted:
- Purchase costs from the original acquisition: solicitor fees, stamp duty land tax, and surveyor fees.2GOV.UK. Capital Gains Tax for Business: Work Out Your Gain
- Capital improvements that add value or extend the property’s life, such as an extension, a loft conversion, or a materially better replacement kitchen. Routine maintenance and redecoration don’t qualify.3GOV.UK. Tax When You Sell Your Home – Work Out Your Gain
- Sale costs: estate agent commission, disposal solicitor fees, and advertising.
The line between an improvement and a repair matters. Swapping a broken boiler for the same model is a repair and doesn’t reduce the gain. Upgrading the whole heating system to a higher specification is an improvement and does. Keep the invoices; HMRC can ask for evidence years after the sale. Completion statements from the purchase and the sale are the two documents to guard most carefully.
Mortgage interest and other finance costs cannot be deducted from the gain. Those may have reduced your rental income tax bill during ownership, but they don’t feature in the CGT calculation.
The £3,000 Allowance and Capital Losses
Every individual has a £3,000 annual exempt amount for 2025–26. Only gains above that figure are taxed.4GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances If you own the property jointly with a spouse or civil partner, each of you applies your own £3,000 to your share of the gain. The allowance can’t be carried forward. Use it or lose it.
If you’ve made a loss on another asset in the same tax year, that loss must be set against your gains before the annual exempt amount is applied, even where the allowance would already cover the gains.5GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances – Losses Unused losses carry forward indefinitely, but carried-forward losses can only bring your gains down to the annual exempt amount, not below it.
You have four years from the end of the tax year in which a loss arose to report it to HMRC. Miss that and the loss is gone. Losses on gifts or sales to family members are ring-fenced: they can only be set against gains from later transactions with the same person.5GOV.UK. Capital Gains Tax: What You Pay It On, Rates and Allowances – Losses
When the Property Was Once Your Home
If the buy-to-let was your only or main residence at any point during ownership, Private Residence Relief can cut the taxable gain substantially. Relief covers the proportion of the ownership period the property was your main home, and the final nine months of ownership always qualify automatically as long as it was your main home at some stage, even if it was let during those final months.6HM Revenue & Customs. HS283 Private Residence Relief
The calculation is a fraction: qualifying months of occupation divided by total months of ownership, applied to the overall gain. Full relief requires the property to have been your only or main home throughout ownership, the grounds not to exceed the permitted area, and no part to have been used exclusively for business. If any condition fails, partial relief may still apply.6HM Revenue & Customs. HS283 Private Residence Relief
Letting Relief is narrower than most landlords assume. It only applies where you let part of your home while still living in it yourself, essentially a lodger arrangement. If you moved out entirely and then let the whole property to tenants, Letting Relief gives you nothing. Where it does apply, the relief is the lowest of the Private Residence Relief already calculated, £40,000, or the chargeable gain attributable to the letting.
Reporting and Paying Within 60 Days
You must report the disposal and pay any CGT due within 60 days of completion.7GOV.UK. Report and Pay Your Capital Gains Tax: If You Sold a Property in the UK on or After 6 April 2020 The clock starts the day ownership transfers, not the day contracts exchange. Most UK tax obligations follow annual cycles, which is why this 60-day rule catches people out.
Reporting goes through the Capital Gains Tax on UK property account, a dedicated online service separate from Self Assessment. You’ll need a Government Gateway ID. Self Assessment filers still have to use this service first and then include the gain on the next tax return as well.7GOV.UK. Report and Pay Your Capital Gains Tax: If You Sold a Property in the UK on or After 6 April 2020 Set the account up before the property is even listed.
What Happens If You’re Late
Late filing triggers an automatic £100 penalty. Over three months late, HMRC adds £10 per day for up to 90 days, a potential £900 on top. At six months, a further 5% of the tax due or £300, whichever is greater, is charged, and the same again at twelve months.
Late payment penalties run separately. If tax is still unpaid 30 days after the deadline, HMRC charges 5% of the outstanding amount, another 5% at six months, and another 5% at twelve months. Interest also accrues on unpaid tax at 7.75% per year as of early 2026.8GOV.UK. HMRC Interest Rates for Late and Early Payments Penalties and interest compound quickly.
Transferring to a Spouse or Civil Partner
A transfer to your spouse or civil partner while you’re living together is treated as “no gain, no loss.” No CGT arises on the transfer itself, whatever the market value, and the receiving spouse takes on your original base cost so the full gain crystallises when they later sell.9HM Revenue & Customs. HS281 Capital Gains Tax Civil Partners and Spouses
After separation, no-gain/no-loss treatment continues until the end of the third tax year following the year you stopped living together, or the date of a formal divorce or dissolution, whichever comes first. Transfers made under a court order or formal separation agreement keep no-gain/no-loss treatment with no time limit. Outside those windows, the transfer is treated as a disposal at market value and can produce a CGT bill.9HM Revenue & Customs. HS281 Capital Gains Tax Civil Partners and Spouses
If You Live Outside the UK
Non-UK residents must report disposals of UK residential property within the same 60-day window, and the obligation applies even when there is no tax to pay or the sale produced a loss.10GOV.UK. Tell HMRC About Capital Gains Tax on UK Property or Land If You’re Not a Resident in the UK The same rates and reliefs apply as for UK residents, and reporting uses the same online property account. UK residents can skip the 60-day return where the disposal is covered by the annual exempt amount or produces a loss; non-residents cannot.