Tax Relief When Selling a Rental Property: UK 2026/27

Selling a UK rental property can create Capital Gains Tax (CGT), but relief may be available for periods when it was your only or main home, qualifying capital losses and certain specific situations. Letting a property by itself does not generally qualify for Business Asset Disposal Relief.

How the gain is calculated

Start with disposal proceeds, then deduct allowable acquisition and disposal costs and qualifying capital improvement expenditure:

Sale proceeds − purchase cost − allowable buying/selling costs − capital improvements = gain before reliefs and losses.

Mortgage repayments, routine repairs and revenue expenses are not added to CGT base cost. Costs already deducted from rental income cannot be claimed again.

Private Residence Relief

If the property was your only or main residence for part of the ownership period, Private Residence Relief can exempt the corresponding portion of the gain. The final nine months of ownership are generally treated as qualifying where the property has been a main residence at some point, with a longer final period for certain disabled people or care-home residents.

Periods of absence can qualify where statutory conditions are met, sometimes requiring occupation before and after.

Letting Relief

For disposals after 5 April 2020, Letting Relief is generally limited to periods when the owner shared occupation of the home with the tenant. It is not normally available simply because a former home was later let while the owner lived elsewhere.

The maximum relief is the lowest of £40,000, the amount of Private Residence Relief and the gain attributable to the shared letting period.

Annual exempt amount

Individuals have a £3,000 annual exempt amount for 2026/27, shared across taxable gains in the year. It is not a property-specific allowance and unused amounts cannot be carried forward.

Capital losses

Allowable losses in the same year are set against gains before the annual exempt amount. Brought-forward losses are then used only as necessary to reduce remaining gains to the annual exempt amount, subject to claim and reporting rules.

CGT rates on residential property

For disposals from 30 October 2024, individual residential-property gains are generally taxed at 18% to the extent they fall within the unused basic-rate band and 24% above it. Trustees and personal representatives normally use the applicable higher rate.

The calculation uses taxable income, gains, losses, reliefs and the annual exempt amount.

60-day UK property reporting

A UK resident must generally report and pay CGT on a taxable disposal of UK residential property within 60 days of completion. Non-UK residents have broader UK property reporting duties and may need to report even where no tax is due.

The 60-day return does not always replace Self Assessment; the disposal may also need to appear on the annual tax return.

Transfers between spouses or civil partners

Transfers while living together are generally made on a no-gain/no-loss basis, meaning the recipient inherits the transferor’s base cost and history. A later sale can still generate tax. Separation and divorce have separate extended rules and reliefs.

Inherited property

The CGT base cost is generally the probate value at the date of death, not the deceased owner’s historic purchase price. Inheritance Tax and CGT are separate. Improvement and selling costs after inheritance can affect the calculation.

Business Asset Disposal Relief

A normal buy-to-let property business is generally investment activity, so selling a rental property does not usually qualify. Relief may arise in limited circumstances involving a genuine trading business, qualifying furnished-holiday-letting transitional disposals or an associated disposal, subject to detailed conditions and deadlines.

The furnished holiday lettings tax regime ended from April 2025. Transitional rules and anti-forestalling provisions can affect earlier cessation or disposal plans.

Rollover and incorporation relief

Replacing one ordinary rental property with another does not normally defer the gain. Incorporating a substantial property business may qualify for incorporation relief only if statutory business and transfer conditions are met; Stamp Duty Land Tax and mortgage issues also arise.

Allowable property costs

• purchase price and acquisition legal fees;
• Stamp Duty Land Tax paid on acquisition;
• estate-agent and conveyancing fees on sale;
• capital improvements still reflected in the property at disposal;
• valuation fees required for the CGT computation.

Decoration, maintenance, mortgage interest and replacement of worn items are normally revenue rather than capital costs.

Records and calculations

1. Obtain the completion statement and original purchase file.
2. Build a dated schedule of occupation and letting.
3. Identify capital improvements separately from repairs.
4. Check losses, previous nominations and spouse transfers.
5. Estimate the 60-day payment using current-year income.
6. Reconcile the final figure on Self Assessment where required.

Official guidance

• HMRC: tax when selling property
• HMRC: Private Residence Relief
• HMRC: report and pay property CGT

Property CGT is fact-specific. Obtain advice before completion where reliefs, residence or ownership are complex.