Guide · 9 min read
CGT on disposal of rental property: current rates, the 60-day reporting rule, deductible costs, and how portfolio landlords sequence disposals, or refinance instead of selling.
Written by Matt Lenzie · Published 10 June 2026
Advice from
Matt Lenzie · 25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
25+ year career banker (Bank of Scotland, Lloyds Banking Group). £300m+ raised for property clients.
Selling a buy-to-let is the only routine landlord transaction with a personal tax deadline measured in days: as of June 2026, UK residents must report the gain and pay the capital gains tax within 60 days of completion, on penalty of automatic fines. The tax itself, at 18% or 24% on residential gains in the 2025/26 year with only a £3,000 annual exempt amount, is frequently the largest single cost of the exit, bigger than the agent, the solicitor and the mortgage exit fees combined. Yet the sequencing decisions taken in the six months before the sale, who owns the property at exchange, which tax year the gain lands in, whether to sell at all rather than refinance, routinely move the bill by thousands of pounds.
This guide works a full CGT computation from purchase to payment, covers the 60-day rule and the tenant-in-situ question under the Renters' Rights Act 2025, then sets out the portfolio sequencing levers and the alternatives to selling that a broker desk sees used in practice.
The computation is mechanical once the allowable items are identified. The worked case: a three-bed terrace bought for £180,000 in 2012, sold for £290,000 with completion in June 2026, owned by a higher-rate taxpayer.
| Computation line | Amount |
|---|---|
| Sale price (June 2026) | £290,000 |
| Less: purchase price (2012) | (£180,000) |
| Less: acquisition costs (2012 SDLT £1,800, legals £850, survey £450) | (£3,100) |
| Less: capital improvements (loft conversion and kitchen extension) | (£22,000) |
| Less: selling costs (agent £3,625, legals £1,100) | (£4,725) |
| Gain | £80,175 |
| Less: annual exempt amount (2025/26) | (£3,000) |
| Taxable gain | £77,175 |
| CGT at 24% (higher-rate taxpayer) | £18,522 |
Two lines deserve attention. First, the improvements line only takes capital expenditure: works that enhanced the property beyond its state at purchase, the loft conversion, the extension, a first-time central heating system. Redecoration, like-for-like kitchen replacement and repairs are revenue expenses, deductible against rental income in the year they were incurred under HMRC's Property Income Manual PIM2030, and they cannot be claimed twice: £8,000 of redecoration already set against rent over the years adds nothing to the CGT computation. Landlords who never categorised their invoices end up arguing both sides of this line with HMRC at the worst time.
Second, the rate split. HMRC's residential property rates for 2025/26 are 18% within whatever basic-rate band the seller has left after their income, and 24% above. A seller with £8,000 of unused basic-rate band pays 18% on £8,000 and 24% on the remaining £69,175: £18,042, a £480 saving against the pure higher-rate figure. The gain itself counts when working out how much band remains, so large gains push themselves into the 24% rate; the planning lever is the seller's other income in the year of exchange, which is why disposals pair naturally with low-income years, retirement, sabbaticals, or a deliberate dividend holiday for company directors.
Since 2021 the CGT on a UK residential disposal has been due long before the self assessment return: UK residents must file a return through HMRC's UK Property Account and pay the tax within 60 days of completion. The disposal still appears on the year's self assessment return afterwards, where the figures are trued up.
The penalty structure is automatic: £100 the day the return is late, a further £300 or 5% of the tax (whichever is greater) at six months and again at twelve, plus interest on unpaid tax from day 61. The practical traps we see: sellers who assume their accountant files it (the account is the taxpayer's own Government Gateway, and authorising an agent takes time, start before completion); sellers who do not know their other 2026/27 income yet and must estimate the rate split (estimate, file, and adjust at self assessment, that is the designed mechanism); and sellers with a loss or a gain fully covered by the exempt amount, who in general have nothing to file as UK residents but should keep the computation on record.
Selling tenanted means selling to investors only, and the investor pool prices accordingly: across auction results and portfolio-sale desks, tenanted mainstream stock trades at 10% to 15% below vacant-possession value, more where the rent is below market or the tenancy paperwork is untidy. On the £290,000 house above, that is £29,000 to £43,500 of discount, which dwarfs the carry cost of selling vacant in almost any arithmetic.
But "selling vacant" got slower. Under the Renters' Rights Act 2025 regime in force as of June 2026, Section 21 no-fault notices are abolished and all tenancies run as periodic assured tenancies. A landlord selling must rely on the dedicated selling ground (ground 1A): four months' notice, not usable in the first twelve months of a tenancy, with a ban on re-letting for twelve months after using it, so it is a genuine commitment to sell, not a negotiating lever. The realistic vacant-sale timeline is therefore four months of notice, any overrun if the tenant does not leave, then a five-to-seven-month marketing-to-completion period. Cost it honestly: on our worked house, £950 of rent forgone and roughly £700 of mortgage interest carried monthly means eight months of vacancy costs about £8,000 to £9,000 net, against a tenanted discount three to four times larger. Vacant still wins on the numbers for mainstream stock; the Act's real effect is that the decision must be made eight to twelve months before the money is needed, and a tenant who pays reliably is worth keeping until the plan is firm.
Disposing of several properties is where CGT planning earns real money, and the levers are unglamorous:
One disposal per tax year. Each tax year brings a fresh £3,000 annual exempt amount and a fresh look at the rate bands. Two £80,000 gains in one year stack: the second £80,000 sits entirely at 24% and only one exempt amount applies. Spread across two Aprils, each gain gets its own exempt amount and its own chance at any unused 18% band. The date that matters is exchange of contracts, not completion, so a sale exchanging on 4 April and one exchanging on 6 April are a year apart for CGT despite completing in the same month.
Spousal transfer before sale. Transfers between spouses living together are no-gain/no-loss, so moving a half share to a spouse before exchange splits the gain across two taxpayers. Worked on our £80,175 gain:
| 2025/26 outcome | Sole higher-rate owner | 50/50 after spousal transfer (spouse has £30,000 of basic band) |
|---|---|---|
| Landlord's CGT | (£80,175 − £3,000) × 24% = £18,522 | (£40,088 − £3,000) × 24% = £8,901 |
| Spouse's CGT | n/a | £37,088 taxable: 18% × £30,000 + 24% × £7,088 = £7,101 |
| Household total | £18,522 | £16,002 |
A £2,520 saving for a deed costing a few hundred pounds, but the transfer must be real and unconditional, made comfortably before a buyer is found, and it interacts with the mortgage: adding or removing a name, or moving beneficial interest on a charged property, needs the lender's consent and can have SDLT consequences where assumed debt exceeds £40,000. The mechanics of moving beneficial interest properly are covered in our guide to declarations of trust on rental property.
Losses and offsetting. Capital losses, the flat that sold below its 2007 purchase price, offset gains pound for pound: current-year losses apply automatically, and earlier losses carry forward indefinitely provided they were claimed within four years of the tax year of the loss, with brought-forward losses applied only down to the exempt amount so it is not wasted. A planned disposal programme runs the loss-making property and the gain-making property through the same tax year deliberately. One broker-desk addition: check the early repayment charges (ERCs) on each mortgage before sequencing, a 3% ERC on a £150,000 fixed-rate balance is £4,500, and re-ordering the disposals so each sale lands after its fix ends often saves more than the tax planning does.
Remortgage instead of selling. Borrowing is not a disposal, so a buy-to-let remortgage releases equity with no CGT event at all. Our worked house, worth £290,000 with £120,000 of debt, refinances at 75% loan-to-value to £217,500, releasing £97,500 tax-free against the roughly £146,750 a sale nets after CGT and costs but with the asset, the rent and all future growth retained. The constraints are the lender's, not HMRC's: the higher loan must pass the interest cover stress test on the rent, which is exactly what our buy-to-let stress test calculator checks, and at four or more mortgaged properties the application is assessed portfolio-wide, covered on our portfolio mortgages page. Refinancing defers the gain rather than extinguishing it, and on current rules the base cost still steps up to market value on death, which is why older portfolio landlords so often refinance and hold rather than sell.
Selling to your own limited company. A sale to a connected company happens at market value whether or not money changes hands, so it crystallises the full CGT bill and the company pays SDLT at the surcharged rates, around £19,000 on a £290,000 transfer at 2025/26 rates. As a standalone move it is rarely sensible: roughly £37,500 of combined tax on our worked house to keep owning the same asset. It earns its cost only as part of a deliberate structure, typically where Section 24 relief, future rate differences and estate planning together outweigh the entry charge across a whole portfolio, and that analysis belongs in our guide to transferring property to a limited company.
Incorporation before a disposal programme. Where Section 162 incorporation relief genuinely applies, broadly, a property business run as a business, transferred wholly in exchange for shares, the personal gain rolls into the share base cost and the company takes the properties at market value. Properties the company then sells are taxed only on growth since incorporation, at corporation tax rates, which can transform the arithmetic of selling, say, four properties out of twelve over the following years. It is the most aggressive structure on this page, HMRC scrutinises the "business" condition, and it should never be driven by the disposal plan alone, but for landlords already incorporating for Section 24 reasons, sequencing the incorporation before the disposal programme rather than after is frequently worth six figures across a large portfolio.
Last reviewed: June 2026.
For the 2025/26 tax year, gains on UK residential property are taxed at 18% within your remaining basic-rate band and 24% above it, after a £3,000 annual exempt amount. The gain is the sale price minus the purchase price, minus acquisition costs (stamp duty, legal fees, survey), capital improvements (extensions, conversions, not redecoration), and selling costs (agent and legal fees). On a representative disposal, a property bought for £180,000 in 2012 and sold for £290,000 in 2026 with £29,825 of allowable costs produces a taxable gain of £77,175 and a bill of £18,522 for a higher-rate taxpayer.
UK residents who sell a UK residential property at a taxable gain must report the disposal and pay the CGT within 60 days of completion, using HMRC's online UK Property Account. This sits outside, and in addition to, the normal self assessment return. Missing the deadline triggers an automatic £100 penalty, further penalties of £300 or 5% of the tax at six and twelve months, and interest on the unpaid tax from day 61. As of June 2026 the 60-day clock runs from completion, not exchange, although the date of exchange fixes which tax year the gain falls into.
It is a priced trade-off. Tenanted property sells into an investor-only buyer pool and typically prices 10% to 15% below vacant possession, which on a £290,000 house is £29,000 to £43,500. Selling vacant recovers that discount but costs the void: under the Renters' Rights Act 2025 regime in force as of June 2026, recovering possession to sell means the selling ground with four months' notice, unusable in the first twelve months of a tenancy, followed by the marketing period, so six to nine months of lost rent and mortgage carry, perhaps £8,000 to £12,000, is realistic. Vacant usually nets more on mainstream stock; tenanted wins where the discount is small or the landlord needs certainty and speed.
Yes, in the sense that remortgaging is not a disposal, so releasing equity by borrowing triggers no CGT at all. A property worth £290,000 carrying a £120,000 mortgage can be remortgaged at 75% loan-to-value to release roughly £97,500 with no tax, against around £18,500 of CGT plus selling costs on a sale at the same figure for a higher-rate taxpayer in 2025/26. The trade-off is that the debt and the property remain: the released cash carries interest, the rent must still pass the lender's stress test at the higher loan, and the gain is deferred, not extinguished. Remortgaging suits landlords who want capital out but the asset kept; selling suits those exiting the property entirely.
Three levers do the work as of 2025/26. Sequencing: one disposal per tax year uses a fresh £3,000 annual exempt amount each year and keeps each gain from stacking on top of the last within the rate bands. Spousal transfers: moving a share to a spouse before exchange is a no-gain/no-loss transfer, putting two exempt amounts and potentially the spouse's 18% basic-rate band against the gain, worth around £2,500 on a representative £80,000 gain. Losses: capital losses on other disposals offset gains, and unused losses carry forward indefinitely provided they are claimed within four years. Timing exchange either side of 5 April moves a gain between tax years.
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