Lettings Relief After the 2020 Changes: Who Still Qualifies?

Lettings relief now only applies to landlords who shared occupation of the property with their tenant during the letting, following changes that took effect on 6 April 2020. Before that date, lettings relief could shelter up to £40,000 of gain for any landlord who had once lived in a property they later let out. The reform removed the relief for the vast majority of buy-to-let landlords, making a clear understanding of capital gains tax on rental property in the UK more important than ever when you sell.

Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, helps landlords calculate their liability and claim every relief they are still entitled to. This guide explains who still qualifies for lettings relief, how CGT on a rental property is worked out for 2026/27, and the 60-day reporting rule you must not miss.

Key Takeaways

• Lettings relief since 6 April 2020 is available only where the owner lived in the property at the same time as the tenant during the period of letting.
• Lettings relief is capped at the lowest of £40,000, the amount of private residence relief due, or the gain attributable to the let period.
• Capital gains tax on residential property is charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers in 2026/27.
• The capital gains tax annual exempt amount is £3,000 for the 2026/27 tax year.
• Private residence relief automatically covers the final 9 months of ownership for a property that was once your main home.
• UK residential property disposals with tax to pay must be reported and paid within 60 days of completion.

Who still qualifies for lettings relief after the 2020 changes?

Lettings relief after April 2020 qualifies only landlords who were in shared occupancy, meaning you lived in the property at the same time as the tenant during the period it was let. A landlord who moved out entirely before letting the property no longer qualifies, regardless of how long they previously lived there.

In practice, this restricts lettings relief to arrangements such as renting a spare room to a lodger while continuing to live in the home yourself. The typical buy-to-let CGT landlord who let a former home after moving out has no access to the relief on any disposal from 6 April 2020 onwards. Everything else in the CGT calculation, including private residence relief for the years you did live there, continues to apply.

How is capital gains tax on a rental property calculated?

Capital gains tax on a rental property is calculated on the sale proceeds minus the purchase price, allowable buying and selling costs, and capital improvements, with reliefs and the annual exempt amount then applied. The remaining gain is taxed at the 18% and 24% rates for 2026/27.

Allowable costs include stamp duty land tax paid on purchase, legal and estate agent fees, and the cost of improvements such as an extension, but not routine repairs. For a CGT landlord, deducting every legitimate cost directly reduces the taxable gain. For a full overview of rates, exemptions and planning, see our guide to capital gains tax on rental property.

What CGT rates and allowances apply in 2026/27?

Capital gains tax on residential property is charged at 18% for gains falling within your basic-rate band and 24% for gains above it in 2026/27. The annual exempt amount, the slice of gain you can realise tax-free, is £3,000 for the 2026/27 tax year.

Your available basic-rate band matters: the gain is added on top of your income to decide how much is taxed at 18% and how much at 24%. A landlord who is already a higher-rate taxpayer pays 24% on the whole taxable gain. Married couples and civil partners each have their own annual exempt amount and can hold a property jointly to use both, a common piece of selling buy-to-let tax 2026 planning.

How do private residence relief and lettings relief work together?

Private residence relief exempts the proportion of your gain relating to the period a property was your only or main home, plus the final 9 months of ownership, and lettings relief can then reduce part of the remaining gain only in shared-occupancy cases. The two reliefs stack, but lettings relief can never exceed the private residence relief already given.

Worked example: Tom bought a house for £250,000, lived in it for 6 years, then let a room to a lodger while still living there for 4 years, before selling for £450,000. His gain is £200,000 over 10 years of ownership. Private residence relief covers his years of occupation, and because he shared the home with his tenant, lettings relief can shelter a further slice, capped at the lowest of £40,000, the private residence relief due, or the gain on the let part. After reliefs and his £3,000 annual exempt amount, only the reduced net gain is taxed at 18% or 24%.

The rental profits earned during the letting period are taxed under the rules in our guide to how rental income is taxed.

What is the 60-day CGT reporting rule for landlords?

The 60-day rule requires you to report and pay capital gains tax on a UK residential property disposal within 60 days of the completion date, using HMRC's online property disposal service. Missing the deadline triggers automatic penalties and interest even where the eventual tax is small.

A CGT landlord selling a buy-to-let must file this standalone return separately from the annual self-assessment tax return, and then also report the disposal again on the self-assessment return for the year. If no tax is due, for example because reliefs and the annual exempt amount cover the gain, the 60-day return is not required. Calculating the position quickly after exchange is essential so the payment and filing are ready in time.

Frequently Asked Questions

Can I still claim lettings relief on my buy-to-let?

You can only claim lettings relief if you lived in the property at the same time as your tenant during the letting. Since 6 April 2020, landlords who let a former home after moving out entirely no longer qualify. If you rented a room while still living there yourself, lettings relief may still reduce your gain, capped at £40,000.

How much capital gains tax will I pay when I sell a rental property?

You pay 18% on gains within your basic-rate band and 24% on gains above it for a UK residential property in 2026/27, after deducting costs, reliefs, and the £3,000 annual exempt amount. A higher-rate taxpayer pays 24% on the whole taxable gain. The exact figure depends on your income and how the property is owned.

What is the capital gains tax allowance for 2026/27?

The capital gains tax annual exempt amount is £3,000 for the 2026/27 tax year. Each individual has their own allowance, so a property owned jointly by a couple can use two allowances, sheltering £6,000 of gain before any tax is charged. Gains above the allowance are taxed at 18% or 24% for residential property.

Do I have to report the sale of my rental property within 60 days?

Yes, if capital gains tax is due you must report and pay it within 60 days of completion using HMRC's online property disposal service. This applies to UK residential property and is separate from your annual self-assessment return. If reliefs and the annual exempt amount cover the whole gain, no 60-day return is required.

Does selling my buy-to-let count as income?

No, selling a buy-to-let creates a capital gain, not income, so it is taxed under capital gains tax rather than income tax. However, the size of the gain is added on top of your income to decide whether it is taxed at the 18% or 24% rate for 2026/27, so your income level still affects the bill.

How Blue Tick Can Help

Blue Tick Accountants helps landlords across the UK calculate capital gains tax on a rental property accurately, claim private residence and lettings relief where they genuinely apply, and meet the 60-day reporting deadline without penalties. A short planning review before you sell often saves far more than it costs. Head to our website and book a meeting now.

Conclusion

Lettings relief survives only for landlords who shared their home with a tenant, so most buy-to-let owners must now rely on private residence relief, allowable costs, and the £3,000 annual exempt amount to reduce a gain taxed at 18% or 24%. Work out your position as soon as you decide to sell, because the 60-day reporting clock starts at completion and the penalties for missing it are avoidable.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps landlords, self-employed people and limited company owners across the UK. It was last reviewed for the 2026/27 tax year.

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.