Capital gains tax UK landlords: rates, allowances and reporting

Published Friday 16 January 2026

Table of contents

• Who pays capital gains tax?
• What triggers capital gains tax liability?
• What are the landlord CGT rates?
• What is the Capital Gains Tax allowance for landlords?
• How is landlord Capital Gains Tax calculated?
• Landlord capital gains tax exemptions and reliefs
• Allowable expenses for capital gains tax
• Reporting and paying Capital Gains Tax
• Managing your capital gains tax obligations
• FAQs on capital gains tax for landlords

Key takeaways

• Report and pay capital gains tax within 60 days of completing your property sale, as this strict deadline applies to all residential property disposals after 27 October 2021 and late submissions incur penalties.
• Calculate your CGT rate based on your total taxable income, paying either 18% (basic rate taxpayers earning £12,571-£50,270) or 24% (higher rate taxpayers earning £50,271+) on residential property gains for the 2024/25 tax year.
• Reduce your taxable gain by deducting the annual CGT allowance (£3,000 for 2024/25), property improvement costs like extensions or loft conversions, and allowable expenses such as estate agent fees and legal costs.
• Maintain detailed records of all property-related expenses and improvement costs throughout your ownership period, as these documents are essential for accurately calculating your gain and maximising available deductions.

Who pays capital gains tax?

If you're a landlord and you sell a rental property for more than you paid for it, you might have to pay Capital Gains Tax (CGT). This tax applies to the profit you make when you sell, or 'dispose of', an asset that has increased in value.

CGT on property generally applies to buy-to-let properties, business premises, land, and inherited homes that are not your main residence. You don't pay it on your primary home.

What triggers capital gains tax liability?

Capital Gains Tax is triggered when you 'dispose of' a property. This doesn't just mean selling it. A disposal can also include:

• Giving it away to someone other than a spouse or civil partner
• Swapping it for another asset
• Receiving compensation for it, for example, an insurance payout if it was destroyed

The tax is calculated on the gain you make from the date you acquired the property to the date you dispose of it.

What are the landlord CGT rates?

You pay 18% or 24% capital gains tax on residential property, depending on your income tax band. Your rate depends on your total taxable income.

For the full explanation, head to HMRC's Capital Gains Tax page.

The two CGT rates are:

18% CGT basic rate:

Basic rate taxpayers (earning £12,571 to £50,270 annually) pay 18% CGT on residential property.

Key points for basic rate taxpayers:

• Residential property: 18% CGT rate applies
• Business assets: 10% CGT rate applies (machinery, equipment)
• CGT allowance: Deduct from profit before calculating tax
• Rate changes: If your gain pushes you into higher tax bracket, you'll pay both 18% and 28% rates.

24% CGT higher rate

Higher rate taxpayers (earning £50,271+) pay 24% on gains from residential property.

Higher rate CGT details:

• Property CGT: 24% rate on gains from residential property
• Other assets: 20% rate applies
• Available deductions: CGT allowance, personal allowance, property costs

What is the Capital Gains Tax allowance for landlords?

CGT allowance is the amount of profit you can make tax-free each year. This allowance reduces your taxable gain pound-for-pound.

Current allowances 2024/25 onwards: £3,000 for individuals, a significant reduction. It last stood at this level in 1982.

How it works: Gain of £32,000 minus £6,000 allowance = £26,000 taxable gain.

Loss carry-forward: Previous years' losses can reduce current gains and carry forward to future years.

How is landlord Capital Gains Tax calculated?

CGT calculation determines your exact tax liability when selling rental property. Understanding the calculation helps you plan property sales and estimate tax costs.

For example, Stefani is a private landlord with two properties. She sells one of them for £75,000 more than she bought it for, which means she has a gain of £75,000.

• While Stefani owned the property, she spent £10,000 on an extension. She can deduct this from the gain, along with her capital gains tax allowance of £6,000, leaving her with a total taxable profit of £59,000.
• Before calculating Stefani's Capital Gains Tax, we also need to consider her income. Let's say she earns £30,000 annually, meaning she's subject to the lower Capital Gains Tax rate of 18%.

Combined, her gain and her annual income take her over the basic rate threshold of £50,270: £59,000 gain + £30,000 annual income = £89,000 total

• Stefani will pay 18% Capital Gains Tax on the first £20,270 of her gain (£30,000 income + £20,270 = £50,270). 18% of £20,270 = £3,648.60
• For the remaining £38,730 of her gain, she'll need to pay the 28% Capital Gains Tax rate. This equates to £10,844.40.

Stefani's total landlord Capital Gains Tax is £14,493 (£3,648.60 + £10,844.40).

For more help, check out the government's step-by-step guide on calculating Capital Gains Tax.

Landlord capital gains tax exemptions and reliefs

CGT reliefs and exemptions reduce your tax liability by lowering the amount you pay tax on. These reliefs can save you hundreds or thousands of pounds on property sales.

Available reliefs include:

Multiple property owners

Multiple ownership multiplies your CGT allowance by the number of property owners.

Allowance calculation:

• Single owner: £6,000 allowance
• Two owners: £12,000 total allowance (£6,000 × 2)
• Three owners: £18,000 total allowance (£6,000 × 3)

Private Residence Relief

If you've personally occupied the property you're letting out at any point during your ownership, this could reduce your CGT liability. This is called Private Residence Relief, and there are some criteria you need to meet to be eligible (check out the gov.uk website for more information).

Note that this isn't available to landlords letting out property they haven't occupied.

Property improvement expenses

You can claim expenses for property improvements that aren't normal things you'd claim for on a landlord's Self Assessment Tax Return. Things like:

• loft conversions
• extensions
• conservatories

These are structural changes to the property and you can count them as property improvement expenses to deduct from your gain. Repairs such as replacing a boiler or fitting new windows are maintenance costs, and these fall under allowable expenses for your tax return.

Non-resident landlord CGT

If you have UK rental property but you're not a UK resident, there are some extra rules for Capital Gains Tax.

• You need to report disposals of UK land and property, even if you're not a resident. (Non-residents can calculate their capital gains tax using the method shown earlier in this guide.)
• If you're a temporary non-resident, you may need to pay Capital Gains Tax on part of the gain when you return to the UK. If you have gains or losses that occur during the time you spent outside of the UK, these will be brought forward to the current tax year on your return.

Non-residents should also read HMRC's guidance on direct and indirect disposals.

If the property you sell gets most of its value from UK land, it may be an indirect disposal, which is defined as selling an asset that derives 75% or more of its gross value from UK land, and you'll need to change how you calculate CGT. Head to the HMRC website for more information on this.

Capital gains tax rollover relief

Rollover relief is where you reinvest the sale amount from one asset into a new asset, to defer or reduce your Capital Gains Tax liability. You're rolling over the tax you need to pay on profit.

You can only claim rollover relief on certain assets, not on buy-to-let property. Furnished holiday lets and some other assets may count, but you should check HMRC guidance before you claim.

Inherited property and CGT

You do not pay capital gains tax straight away on an inherited property. When you dispose of that asset and make a profit – let's say, you sell the house your parents passed down to you, but you already have a home you own – that's when you'll need to pay CGT. Just a reminder: You do not pay capital gains tax when you sell your main home.

If you decide to let out an inherited property, you'll need to pay Income Tax on the rental income from that asset. You'll do this through a Self Assessment Tax Return. And if you want to keep the inherited property as a second home, you'll need to nominate one of your houses as your main home (and pay Capital Gains Tax on the other if you sell it for a profit later on).

Allowable expenses for capital gains tax

When working out your gain, you can deduct certain costs associated with buying and selling the property. These are different from the day-to-day running expenses you claim against rental income.

Allowable expenses for CGT can include:

• Estate agents' and auctioneers' fees
• Solicitors' and legal fees
• Stamp Duty Land Tax
• Costs of advertising the property for sale

Keeping detailed records of these costs is essential, as they can significantly reduce your final tax bill.

Reporting and paying Capital Gains Tax

Official guidance states you must report and pay any CGT within 60 days of property sale completion (for sales on or after 27 October 2021). You'll need specific information to report accurately.

Required information includes:

• How much you bought and sold the property for
• The date you took ownership of and disposed of the property
• Improvement costs during the time you owned the asset, for example, the cost of adding an extension; you can also deduct the cost of solicitor and estate agent fees
• Any tax reliefs you're entitled to
• Calculations for the gain or loss (see the Stefani example for a step-by-step calculation)
• Basic details about your property, like the address and postcode

Reporting deadline: 60 days from completion date

Key reporting rules:

• Method: Report online through HMRC
• Penalties: Apply for late submissions
• Exemption: Gains below CGT allowance don't need reporting

Managing your capital gains tax obligations

You can read more about your tax obligations as a landlord.

Accurate record-keeping is essential for CGT compliance and maximizing available reliefs, though UK tax law allows reasonable estimates for valuations when necessary, underscoring the value of having precise records. Digital tools streamline this process and ensure you never miss deductible expenses.

Xero's landlord features help you:

• Track expenses: Capture receipts and improvement costs automatically
• Monitor cash flow: View real-time financial performance
• Prepare for tax: Generate reports with all necessary CGT information

For more info on your tax obligations as a landlord, take a look at our guide to Making Tax Digital for landlords or our guide to Self Assessment for landlords.

Ready to simplify your property business finances? Try Xero for free and see how easy landlord accounting can be.

FAQs on capital gains tax for landlords

Here are answers to some common questions about Capital Gains Tax for landlords.

How much is capital gains tax on rental property in the UK?

The current CGT rate on residential property is 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers. The rate you pay depends on your total taxable income.

What is the six year rule for capital gains tax?

The '6 year rule' is a term often used in other countries like Australia and doesn't apply in the same way in the UK. However, if a property was once your main home, you may get Private Residence Relief for that period, plus the final 9 months of ownership, even if you were not living there.

Can I deduct mortgage interest from my capital gain?

No, you cannot deduct mortgage interest payments when calculating your capital gain. Mortgage interest can be claimed as a tax credit against your rental income, but it is not an allowable expense for Capital Gains Tax purposes.