Capital Gains Tax on Rental Property: A Landlord's Complete Guide for 2026/27

elling a rental property can generate a significant tax bill. Capital gains tax on rental property is one of the largest one-off charges a landlord is likely to face, yet many sellers are caught off-guard by the size of the liability, the strict 60-day reporting deadline, or the reliefs they could have claimed but missed.

This guide sets out everything UK landlords need to know about CGT on buy-to-let and rental properties in 2026/27: the rates that apply, the annual exempt amount, how Private Residence Relief and Lettings Relief work today, what costs you can deduct, and the planning strategies worth considering before you put a property on the market.

In this guide:

• CGT rates for residential property in 2026/27 and how the annual exempt amount works
• Private Residence Relief and the final period exemption
• Lettings Relief: who still qualifies after the 2020 rule change
• Allowable costs that reduce your chargeable gain
• The 60-day reporting and payment rule
• Planning strategies to reduce your CGT exposure

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CGT Rates on Residential Property in 2026/27

Capital gains tax on residential property is charged at different rates to gains on most other assets. For the 2026/27 tax year, the rates are:

• 18% on gains that fall within the basic rate income tax band
• 24% on gains that exceed the basic rate band or where you are already a higher or additional rate taxpayer

These rates apply specifically to residential property that does not qualify for full Private Residence Relief. They are higher than the 18% and 24% rates on non-residential assets, so it is worth being clear from the outset that rental property is in its own category.

The annual exempt amount for 2026/27 is £3,000. Every individual has this allowance, which means the first £3,000 of gains in any tax year is free from CGT. For a property held jointly by two people, each owner can apply their own exemption, giving a combined £6,000 of tax-free gains.

Worked example: A higher-rate taxpayer sells a buy-to-let flat and realises a gain of £80,000. After deducting the £3,000 annual exempt amount, the chargeable gain is £77,000. At 24%, the CGT liability is £18,480. Had the property been jointly owned with a basic-rate taxpaying spouse who had no other gains, the combined exemption would be £6,000, reducing the chargeable gain to £74,000, and the liability would be split at the respective rates.

The annual exempt amount cannot be carried forward: use it or lose it in each tax year.

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How the Gain Is Calculated

Before applying any reliefs or the exempt amount, the gain itself must be calculated correctly. The starting point is the difference between the sale proceeds (or market value if the property is gifted or sold below market value to a connected person) and the original cost.

Allowable deductions include:

• The original purchase price and associated purchase costs (stamp duty, legal fees, surveyor's fees)
• Costs of disposal (estate agent's commission, legal fees, any advertising costs)
• Capital improvements made during ownership (an extension, a new bathroom, a loft conversion). Routine repairs and maintenance do not qualify as capital expenditure and cannot be deducted here.

Worked example: A landlord bought a terraced house in 2012 for £180,000, spending £3,500 on legal fees and stamp duty. In 2018 they added a rear extension costing £22,000. They sell in 2026 for £310,000, paying £7,500 in agent's fees and legal costs.

Sale proceeds	£310,000
Less: disposal costs	(£7,500)
Less: purchase price	(£180,000)
Less: purchase costs	(£3,500)
Less: capital improvements	(£22,000)
Gross gain	£97,000
Less: annual exempt amount	(£3,000)
Chargeable gain	£94,000

At 24%, the CGT due would be £22,560. This is a significant liability, and it is exactly why forward planning matters.

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Private Residence Relief: What It Covers and Its Limits

Private Residence Relief (PRR) is the most valuable CGT relief available to UK property owners. It exempts any gain attributable to periods when the property was your main home. If you lived in the property for the entire period of ownership, you pay no CGT at all.

For landlords who previously lived in a property before renting it out, partial PRR applies. The relief covers the proportion of the ownership period during which the property was your main residence, plus an automatic final period exemption of the last 9 months of ownership regardless of whether you were living there.

How partial PRR works: If you owned a property for 10 years (120 months), lived in it as your main home for 4 years (48 months), then rented it out, the 9-month final period is added to the qualifying period. That gives 57 months of qualifying use out of 120, meaning 47.5% of the gain is relieved.

The final period exemption was reduced from 18 months to 9 months from April 2020. For properties occupied by someone with a disability or who has moved into a care home, the final period remains 36 months.

It is also worth noting that you can only have one main residence at a time. If you own more than one property, a main residence election determines which is treated as your PPR.

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Lettings Relief: The Current Position

Lettings relief was once a significant benefit for landlords who had previously lived in a property. Under the old rules it could reduce a gain by up to £40,000. Since April 2020, however, the relief is only available where the owner was in shared occupation of the property with the tenant during the letting period.

In practice, this means that for most landlords who simply moved out and then rented the property to tenants, lettings relief is no longer available. Where a landlord genuinely did share their home, they can claim up to the lesser of:

• £40,000
• The amount of PPR relief available for the same property
• The gain attributable to the letting period

For the vast majority of buy-to-let landlords, lettings relief no longer plays a meaningful role in their CGT calculation. The focus should therefore shift to accurate cost records and PPR if relevant.

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The 60-Day Reporting and Payment Rule

One of the most time-sensitive obligations for landlords is the 60-day reporting and payment rule. When a UK resident disposes of a UK residential property that gives rise to a CGT liability, both the report to HMRC and the payment of the estimated tax must be made within 60 days of completion.

This is not simply a reporting formality. Payment is also due within the same 60-day window. Miss the deadline and HMRC will charge an automatic £100 penalty, rising to £300 after 6 months and further daily penalties thereafter.

The report is made through HMRC's online "Report and pay CGT on UK property" service. You will need your Government Gateway credentials and details of the gain calculation. The CGT paid at this stage is an estimate. It is then reported again on the self-assessment tax return, and any over- or under-payment is reconciled.

Landlords who are registered for self-assessment must still file the 60-day report separately from their tax return. It is a standalone obligation.

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Planning Strategies to Reduce CGT on Rental Property

The best time to plan for CGT is before you sell, not after completion has occurred. Several strategies are worth considering.

Timing the disposal across two tax years. If the gain is large enough to benefit from two years' worth of annual exempt amounts, exchanging contracts in one tax year and completing in the next can save up to £1,440 in tax (£3,000 at 24% per year, for a higher-rate taxpayer). This requires careful co-ordination with the buyer.

Transferring a share to a lower-rate taxpaying spouse or civil partner. A transfer between spouses takes place at no-gain, no-loss. If part of the property is transferred to a spouse who pays income tax at the basic rate, some of the gain may be charged at 18% rather than 24%, and both annual exempt amounts can be used.

Reducing other income in the year of disposal. Because CGT on residential property uses the income tax bands, ensuring your taxable income is lower in the year of sale can shift more of the gain into the 18% band. Maximising pension contributions, for example, can extend the amount taxed at the lower rate.

Using losses. Capital losses from other disposals can be set against property gains. If you have investments standing at a loss, crystallising those losses in the same tax year reduces the net chargeable gain.

Keeping thorough records throughout ownership. Many landlords underestimate their allowable costs simply because they did not keep records of purchase costs, improvement works, or disposal costs from years ago. Every receipt matters.

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How Blue Tick Can Help

Capital gains tax on rental property is one of the most complex areas of personal taxation for UK landlords. The interaction of rates, reliefs, timing rules, and the 60-day reporting obligation means that errors are common and costly. Blue Tick works with landlords to calculate gains accurately, identify all available reliefs, and implement planning strategies before it is too late. Head to our website and book a meeting now.

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The Bottom Line

Capital gains tax on rental property in 2026/27 is charged at 18% or 24%, with only £3,000 of annual exempt amount to absorb part of the gain. The 60-day reporting and payment deadline is strict, and missed reliefs or allowable costs can result in a larger bill than necessary. Whether you are planning a future sale or approaching completion, taking professional advice early is the single most important step a landlord can take.

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This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.