If you sell a rental property or second home for more than it cost, you may owe Capital Gains Tax on the gain. That is your profit after allowable costs, taxed instead of the sale price. For gains from 6 April 2026, GOV.UK gives a £3,000 tax-free allowance and rates of 18% or 24%, set by your taxable income. If tax is due on a UK residential property sale, you must report it and pay within 60 days of completion.
The short version
- Allowance: £3,000 for most individuals in 2026 to 2027.
- Rates: from 6 April 2026, 18% or 24% for individuals. Higher and additional rate taxpayers pay 24%.
- Gain: the sale price less what you paid and the allowable costs.
- Deadline: if tax is due, report and pay within 60 days of completion.
- Reliefs: Private Residence Relief covers the time you lived there, any allowed absences and the last 9 months. Letting Relief is limited to shared occupancy.
How is the gain on a rental property worked out?
GOV.UK says the gain is usually the difference between what you paid and what you got when you sold. You can deduct the costs of buying, selling or improving the property, including estate agents' and solicitors' fees and works such as an extension. Normal maintenance, such as decorating, does not count. GOV.UK's record-keeping advice also lists Stamp Duty.
Section 38 of the Taxation of Chargeable Gains Act 1992 allows only costs "wholly and exclusively" incurred for the purpose, and it allows no interest, apart from one case in section 40. GOV.UK's guidance on selling a home also says you cannot deduct interest on a loan to buy a property.
Use market value, not the price, for a gift (its value on the day you gave it) and for a sale for less than the property was worth to help the buyer. For property you owned before April 1982, start from its value on 31 March 1982. Gather your purchase completion statement, improvement invoices and sale costs before you work out the gain.
What are the Capital Gains Tax rates and allowance for 2026/27?
A page that quotes a £6,000 allowance or a 28% rate for residential property is out of date: those applied up to 2023 to 2024.
| Tax year | Annual exempt amount | Rates on residential property gains (individuals) |
|---|---|---|
| 2022 to 2023 | £12,300 | 18% and 28% |
| 2023 to 2024 | £6,000 | 18% and 28% |
| 2024 to 2025 | £3,000 | 18% and 24% |
| 2025 to 2026 | £3,000 | 18% and 24% |
| 2026 to 2027 | £3,000 | 18% and 24% |
Source: GOV.UK's rates and allowances page, updated 13 April 2026. The 24% rate for residential property applied from 6 April 2024.
GOV.UK sets out how to find your rate:
- Work out your taxable income: your income minus your Personal Allowance and any other Income Tax reliefs.
- Work out your total taxable gains and deduct the tax-free allowance.
- Add what is left to your taxable income.
- The part within the basic rate band is taxed at 18%. Any part above it is taxed at 24%. For 2026 to 2027 the band is £37,700.
How much Capital Gains Tax will I pay on a buy-to-let? A worked example
This is an illustration. Every figure is invented, with no other gains, losses or reliefs. Someone sells a buy-to-let flat that is not their main home.
| Step | Amount |
|---|---|
| Sale price | £340,000 |
| Less purchase price | £250,000 |
| Less buying costs (Stamp Duty Land Tax and legal fees) | £10,000 |
| Less improvement costs (new kitchen) | £12,000 |
| Less selling costs (estate agent and solicitor) | £7,000 |
| Gain | £61,000 |
| Less annual exempt amount | £3,000 |
| Taxable gain | £58,000 |
The tax depends on the owner's other income and on how the property is owned:
| Owner | Working | Tax |
|---|---|---|
| Higher-rate taxpayer | £58,000 at 24% | £13,920 |
| Basic-rate taxpayer, taxable income £25,000 | £12,700 at 18% (£37,700 less £25,000) is £2,286, plus £45,300 at 24% is £10,872 | £13,158 |
| Two equal owners, each with taxable income £25,000 | Each: gain £30,500, less £3,000 is £27,500. £12,700 at 18% is £2,286, plus £14,800 at 24% is £3,552, so £5,838 each | £11,676 |
The same sale produced three different bills, depending on who owns it and what else they earn.
Can Private Residence Relief or Letting Relief help?
Full relief needs the property to have been your only or main home throughout, and GOV.UK adds conditions such as no letting and no exclusive business use, as it explains. Otherwise HMRC's helpsheet HS283 says the exempt part of the gain is a fraction: the time it was your only or main home, plus the final 9 months, plus any allowed periods of absence (for example up to 3 years for any reason, if you lived there before and after), over the whole period you owned it. Section 223 of the 1992 Act sets out the same fraction. HS283 says the final 9 months count as long as the property was your only or main residence at some point.
An invented example: you owned a flat for 120 months and lived in it for 36, then let it. Relief covers 36 plus 9, so 45 of 120 months, or 37.5%. On an £80,000 gain, £30,000 is exempt and £50,000 is chargeable, before the allowance.
Letting Relief is limited. Under section 223B, it applies where part of the home was your main residence while another part was let as residential accommodation. The amount is the lowest of the Private Residence Relief already given, £40,000, and the gain linked to the letting. HS283 says it does not apply where the whole home was let for a time.
If you have two homes, HS283 says you can nominate which is your main residence within 2 years of first having that combination of homes, and without a nomination it is decided on the facts. A couple living together can have only one main residence between them.
What about joint owners, spouses and inherited property?
- Joint owners: GOV.UK says you work out the gain on your share, and each owner reports their own gain or loss.
- Spouses and civil partners: you do not pay Capital Gains Tax on assets you give or sell to a spouse or civil partner you live with. Section 58 keeps that treatment after you separate, up to the end of the third tax year after the year you stopped living together or an earlier court order, although GOV.UK's gifts page describes a shorter test. The recipient's later gain is worked out from what you originally paid.
- Inherited property: GOV.UK says to use the market value at the date of death when you do not know the Inheritance Tax value. For personal representatives the rate is 24%, and the allowance covers the year of death and the next 2 tax years. See our guide to selling inherited property.
When do you report and pay?
GOV.UK says tax due on a UK residential property sale must be reported and paid within 60 days of completing the sale, and that you may have to pay interest and a penalty if you do not.
- Work out your gain and your total gains for the tax year.
- If tax is due, use a Capital Gains Tax on UK property account to report and pay. You need the dates you acquired, exchanged and completed, both values, the costs and any reliefs.
- If you cannot use the online service, complete the online form, print and post it. HMRC then sends a payment reference.
- If you are registered for Self Assessment, also include the sale in your tax return.
An illustration: completion on 10 December 2026 gives a deadline of 8 February 2027 on our count of 60 days, so confirm the due date HMRC shows you. Section 28 of the 1992 Act treats a disposal under a contract as made when the contract is made. On our reading, the exchange date can decide the tax year while the 60 days run from completion, so ask an adviser if the two fall either side of 5 April.
Does the 28 October 2026 Budget change any of this?
The Budget is on Wednesday 28 October 2026, when the Office for Budget Responsibility publishes its forecast. This article describes the rules in force on 17 October 2026. If you are selling soon, check GOV.UK's rates page after the Budget and ask a tax adviser how any change would apply to a sale under contract.
Our costs of selling guide covers the other costs of a sale, our buy-to-let guide gives the landlord's view, and selling a home with a tenant in it is covered here. A free sales valuation gives you a local price to use in your own sums.
Questions readers ask
How long do I have to pay Capital Gains Tax after selling a property?
If tax is due on a UK residential property sale, GOV.UK says you must report it and pay within 60 days of completion, and you may owe interest and a penalty if you are late. If your total gains are under the tax-free allowance, you do not need to report the gain online.
What is the capital gains tax allowance on property for 2026/27, and do I report a gain under it?
The annual exempt amount is £3,000 for most individuals in 2026 to 2027, and £1,500 for most trustees. You pay tax only on total gains above it, after losses and reliefs. If you are registered for Self Assessment, GOV.UK says you report gains in your return when total sale proceeds were over £50,000, even if no tax is due.
Is Letting Relief still available on a buy-to-let?
Only in limited cases. Letting Relief now applies where you lived in part of the home while another part was let as residential accommodation. HMRC's helpsheet says it does not apply where the whole home was let for a time, so a flat let out in full does not qualify.
Can I deduct the mortgage interest I paid when working out my gain?
No. GOV.UK lists interest on a loan to buy the property as a cost you cannot deduct, and section 38 of the Taxation of Chargeable Gains Act 1992 says no payment of interest is allowable, apart from a case in section 40. Purchase costs, improvement costs and the costs of selling can be deducted.
What if I sell a rental property for less than I paid?
GOV.UK says you can report a loss on a chargeable asset to HMRC. It is deducted from gains made in the same tax year, and unused losses can be carried forward. You can claim up to 4 years after the end of the tax year in which you sold the asset. Keep the purchase and sale paperwork.
Sources
- GOV.UK, Capital Gains Tax: rates, allowances, gifts, market value, records, work out if you need to pay and losses, read on 17 October 2026.
- GOV.UK, Capital Gains Tax rates and allowances, updated 13 April 2026.
- GOV.UK, Tax when you sell property and Tax when you sell your home and its work out your gain page, read on 17 October 2026.
- GOV.UK, Report and pay your Capital Gains Tax, read on 17 October 2026.
- HM Revenue and Customs, Private Residence Relief (HS283), 2026 edition, written for 2025 to 2026 returns, published 6 April 2026.
- legislation.gov.uk, Taxation of Chargeable Gains Act 1992, sections 28, 38, 58, 223 and 223B, read on 17 October 2026.
- Office for Budget Responsibility, October 2026 forecast timetable, 10 September 2026.
