When you sell a buy-to-let you pay capital gains tax on the profit, after costs and your £3,000 annual exempt amount, at 18% on any part that fits in your unused basic rate band and 24% on the rest. If tax is due, you must file a UK property return and pay within 60 days of completion. Most of the saving is in getting the computation right and in decisions made before contracts are exchanged.
How the gain is worked out
The starting point is simple: what you received, less what the property cost you. The detail is in which costs count.
- Sale side: the price, less estate agent fees, your solicitor's conveyancing costs and any advertising costs.
- Purchase side: the price you paid, plus stamp duty land tax, legal fees and survey or valuation fees on the purchase.
- Improvements: capital work that is still reflected in the property when you sell, such as an extension, a loft conversion or adding a bathroom. Spending on something you later removed does not count.
Repairs are different. Decorating, replacing a worn kitchen with a similar one, or fixing the roof are maintenance. They are usually deducted from rental income in the year you pay for them, and cannot be claimed again against the gain. Our guide to landlord allowable expenses covers that line. Keep invoices for capital work for as long as you own the property: they are often the largest deduction available and the first thing HMRC asks about.
If you own the property jointly, each owner works out the gain on their own share and has their own exempt amount and rate band. See jointly owned property and tax.
Rates for 2026/27 and the Budget on 28 October
For disposals in 2026/27, residential property gains are taxed at the same rates as other gains: 18% to the extent your taxable gains, added to your taxable income, fall within the £37,700 basic rate band, and 24% above that. If any of your income is taxed at the higher rate, all of your gains are at 24%. The annual exempt amount is £3,000, and you can set it against the gains charged at 24% first.
The Autumn Budget is on 28 October 2026. Nothing has been announced about capital gains tax, and any change could start on the day or later. Our pre-Budget checklist explains why rushing a sale on rumour is rarely wise.
Worked example
Daniel bought a flat in 2013 for £250,000, paying £2,500 stamp duty land tax and £1,500 in legal fees. In 2019 he spent £30,000 on an extension. He also replaced the boiler, which he claimed against rent. He exchanges contracts in November 2026 at £420,000 and pays £6,000 in agent and legal fees. His salary is £40,000, so his taxable income is £27,430.
| Item | Amount |
|---|---|
| Sale price less selling costs | £414,000 |
| Less purchase price, stamp duty and legal fees | (£254,000) |
| Less extension | (£30,000) |
| Gain | £130,000 |
| Less annual exempt amount | (£3,000) |
| Taxable gain | £127,000 |
| £10,270 (unused basic rate band) at 18% | £1,848.60 |
| £116,730 at 24% | £28,015.20 |
| Capital gains tax | £29,863.80 |
The boiler is not in the computation, because it was already relieved against rental income.
The 60-day return and payment
For a UK resident selling UK residential property, a return through HMRC's Capital Gains Tax on UK property service is required when there is tax to pay. You must file it, and pay the tax, within 60 days of completion. Late filing or payment can bring penalties and interest.
- No tax, no return. If the gain is covered by your annual exempt amount, by losses or by relief, a UK resident does not need to file one. Non-residents must report every disposal of UK property or land, even with nothing to pay: see UK landlords living abroad.
- Estimating your rate. You will not know your full income for the year when you file, so the law lets you use a reasonable estimate to decide how much of the gain falls at 18%. If your income turns out higher, the balance is settled later.
- Losses. Losses from disposals made earlier in the same tax year, and losses carried forward from earlier years, can reduce the amount due on the return.
- Self Assessment still applies. If you file a tax return, the sale goes on it too. The 60-day payment counts towards your bill for the year, and any shortfall or overpayment is settled through the return. See the 31 January 2027 deadline.
Exchange or completion: which date matters
For capital gains tax the disposal happens when an unconditional contract is made, which for property in England and Wales means exchange, not completion. If the contract is conditional, the date is when the condition is met. That date decides the tax year of the gain, and so which exempt amount, rate band and rates apply.
The 60-day clock, however, runs from completion. A sale that exchanges on 30 March 2027 and completes on 20 April 2027 is a 2026/27 gain, with the return due 60 days after 20 April.
Ways to reduce the bill
- Timing across tax years. Exchanging on or after 6 April 2027 rather than before moves the gain into 2027/28, with a fresh exempt amount and basic rate band. It also matters if your income will be lower in one year, for example after retiring. Rates for 2027/28 have not been announced.
- Losses. An allowable loss on another asset, such as shares, made in the same tax year is set against the gain. Unused losses from earlier years can be used too, provided they were claimed within four years of the end of the year in which they arose.
- Transfers to a spouse or civil partner. Transfers between spouses or civil partners who live together take place at no gain and no loss, and are outside the 60-day regime. Moving a share to a spouse with an unused exempt amount or basic rate band before exchange can reduce the total. It must be a genuine, outright gift: HMRC looks at who really owns the property, for example who receives the sale proceeds. A transfer with strings attached, or proceeds that go straight back, is open to challenge. They also pay tax on their share of the rent from then on.
In Daniel's example, if he had first given half the flat outright to his wife, who has no taxable income, the two bills would total £26,881.80, about £2,982 less. That is before tax on her share of the rent and any other costs of the transfer, such as stamp duty if she takes on part of a mortgage, which need checking first.
Former homes, non-residents and incorporation
If you once lived there, private residence relief covers the years you lived in it plus the last nine months of ownership. Letting relief now applies only if you lived there alongside your tenants. See letting your former home.
Non-residents have their own rules. See our guide for non-resident landlords.
Keeping the portfolio but moving it into a company is not a way around capital gains tax: it is usually a disposal at market value. Whether any relief applies depends on the facts. See incorporating a property portfolio.
What to do now
- Gather the purchase completion statement, sale estimates and invoices for every improvement.
- Separate improvements from repairs already claimed against rent.
- Estimate your taxable income for the year of exchange to see how much of the gain falls at 18%.
- Before exchange, consider timing, losses and any transfer to a spouse.
- Diarise 60 days from completion and set aside the tax.
- Include the sale on your Self Assessment return.
If you are planning a sale, see our property tax service or book a consultation and we will work out the gain and the return with you.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.