Capital Gains Tax for Landlords | 2026 Guide

What is Capital Gains Tax (CGT)?

Capital Gains Tax is a tax on the profit (gain) you make when you sell or dispose of a capital asset, such as a buy-to-let property, a second home, or land. The gain is the difference between the price you paid for the property (plus any allowable costs) and the price you sold it for.

When Do You Pay Capital Gains Tax?

You pay CGT when you:

• Sell a property that is not your main home (e.g., a buy-to-let property, a second home, or a holiday let).
• Give away a property or transfer it to someone else (unless it’s your spouse/civil partner).
• Sell or dispose of land.

You do not pay CGT on:

• Your main home (Principal Private Residence Relief).
• Property sold at a loss.

CGT Rates for 2025-26

The rate you pay depends on your income. If your total taxable income (including the gain) is below the basic rate band (£37,700 for 2025-26), you pay 18% on the part of the gain within the band. Any gain above the basic rate band is taxed at 24%.

The Annual Exempt Amount

Everyone has an Annual Exempt Amount (AEA) — a tax-free allowance for capital gains. For the 2025-26 tax year, the AEA is £3,000. You only pay CGT on the gain above this amount.

How to Calculate Your Capital Gain

Step 1: Calculate the Sale Proceeds

• The sale price of the property.
• Deduct any selling costs (e.g., estate agent fees, legal fees, advertising costs).

Step 2: Calculate the Purchase Costs

• The original purchase price.
• Add any purchase costs (e.g., stamp duty, legal fees, survey fees).
• Add the cost of any improvements (but not repairs and maintenance).

Step 3: Subtract the Costs from the Proceeds

• This gives you the gain.

Step 4: Deduct Your Annual Exempt Amount

• Deduct £3,000 from the gain.

Step 5: Apply the CGT Rate

• Apply the 18% or 24% rate.

Example Calculation

• Sale price: £300,000
• Selling costs: £5,000 (legal, estate agent)
• Net sale proceeds: £295,000
• Purchase price: £200,000
• Purchase costs: £7,000 (stamp duty, legal, survey)
• Improvements: £10,000 (extension)
• Total purchase costs: £217,000
• Gain: £295,000 – £217,000 = £78,000
• Annual Exempt Amount: £3,000
• Taxable gain: £75,000
• CGT (assuming higher rate taxpayer): £75,000 × 24% = £18,000

Principal Private Residence Relief (PPR)

If the property was your main home at any time, you may be eligible for PPR relief. This can reduce your CGT bill significantly. The relief covers:

• The period you lived in the property as your main home.
• The final 9 months of ownership (even if you weren’t living there).

If you let out a property that was once your main home, you may also be eligible for Lettings Relief, which can reduce your CGT liability.

Reporting and Paying CGT

Since 6 April 2020, you must report and pay CGT on residential property sales within 60 days of completion. This is a strict deadline.

1. Use the UK Property Account: You must report the sale to HMRC using the UK Property Account.
2. Pay the Tax: You must pay the CGT within 60 days. You can pay via bank transfer or debit card.
3. Include in Your Tax Return: You must also include the details in your Self Assessment tax return for the relevant tax year.

For more on payment methods, see our guide: HMRC Payment Methods.

How We Can Help

Our ACCA-qualified accountants can:

• Calculate your Capital Gains Tax accurately.
• Identify reliefs and allowances you may be eligible for.
• Help you report and pay CGT within the 60-day deadline.
• Advise on tax-efficient property transactions.

This guide is intended for informational purposes and is based on UK tax regulations as of June 2026. Tax laws and government systems are subject to change. Always consult with a qualified professional regarding your specific financial situation. Right Tax Returns is an ACCA-registered firm.