Capital Gains Tax on Rental Property: 2025 Guide to Calculating, Reporting & Saving

Sold a UK rental property? This guide explains how capital gains tax on rental property works, how to calculate your bill, and how to file it online in days—not weeks.

Why CGT Applies to Rental and Second Homes

If you sell a buy-to-let, holiday home, or a previous main residence that no longer qualifies for full Private Residence Relief, any profit is treated as a capital gain. HMRC expects you to work out the figure, pay the tax, and submit a CGT return within 60 days of completion.

Miss the deadline and late-filing penalties kick in from £100 and climb quickly. That makes understanding capital gains on rental property essential the moment you accept an offer.

Step-by-Step: Calculate Capital Gain on Sale of Rental Property

Below is a practical workflow you can copy and paste into your own checklist.

1. Pull together purchase data: contract date, purchase price, SDLT, legal fees, and any improvement costs.
2. Gather sale data: completion date, sale price, estate-agent fees, legal fees.
3. Adjust for improvements: Only enhancements that add value or extend life—e.g., a loft conversion—are deductible.
4. Calculate the chargeable gain: Sale proceeds minus allowable costs.
5. Apply reliefs: Private Residence Relief for qualifying periods lived in, plus the last 9 months. Use Letting Relief if you once lived in the property and later let it.
6. Deduct annual CGT allowance: £6,000 for 2023/24 (dropping to £3,000 from April 2024).
7. Apply tax rates: Basic-rate income taxpayers pay 18% on residential property gains; higher-rate payers pay 24%. Gains that straddle the bands are split.

Example: You bought a flat for £200,000 in 2015, spent £10,000 on a loft upgrade, and sold it in 2024 for £350,000. Selling costs were £5,000. Your chargeable gain is £135,000. After the £6,000 allowance, the taxable gain is £129,000. If you’re a higher-rate taxpayer, CGT is £30,960 (£129,000 × 24%).

Capital Gains Tax When Selling a Rental Property vs. a Main Home

Your main residence usually enjoys full Private Residence Relief, but there are exceptions:

• You moved out more than 9 months before selling.
• You used part of the home exclusively for business.
• The plot exceeds 5,000 m² (1.2 acres).

In these cases, capital gains tax on sale of rental property rules apply to the ineligible portion of the gain.

Deadlines & Paperwork: Avoid HMRC Penalties

Within 60 days of completion you must:

• Register for a Capital Gains Tax on UK property account (even if you already have Self-Assessment).
• Submit a UK property return online.
• Pay the estimated CGT.

Later, you’ll reconcile the figure on your Self-Assessment return. Getting it right first time saves interest and penalty charges.

CGT Optimisation Strategies

1. Time the sale around tax years
Exchange contracts just after 6 April to push payment into the next tax year—giving up to 22 months’ cash-flow grace.

2. Maximise spousal allowances
Transfer a share of the property to a spouse or civil partner before exchange to use two annual exemptions and possibly lower tax rates.

3. Offset capital losses
Dispose of poorly performing assets in the same tax year to reduce the gain.

4. Keep airtight records
HMRC can ask for evidence up to six years later. Scan receipts and store them in the cloud labelled by tax year.

5. Consider incorporation
Future acquisitions placed in a company are taxed at 25% corporation tax rather than 24% CGT + dividend taxes, although mortgage rates and running costs differ. Professional advice is key.

Common Mistakes (And How to Dodge Them)

Overclaiming repairs: Routine maintenance—painting, boiler servicing—cannot be deducted from the gain; they belong in annual income accounts.

Ignoring occupancy dates: Even a few months of genuine residence can unlock Private Residence Relief and Letting Relief. Keep council-tax bills and electoral roll proofs.

Missing 60-day filing: Saving £1,000 on tax is pointless if penalties wipe it out. Put the CGT deadline in your phone the day you list the property.

SwiftCGT: Fixed-Fee CGT Filing in Three Working Days

If the admin feels overwhelming, SwiftCGT offers a streamlined, online solution:

• HMRC-registered chartered accountants prepare and submit your UK property CGT return.
• £299 for a sole owner.
• £449 for joint owners—50% discount on the second return.
• Returns submitted within three working days of receiving your numbers.

Simply upload your purchase and sale documents; SwiftCGT does the calculations, files with HMRC, and emails you proof—all before late-filing penalties even become a threat.

What Happens After You File?

HMRC issues a payment reference immediately. Interest accrues daily after 60 days, so settle the bill promptly. Once the Self-Assessment window opens, reconcile any difference caused by reliefs or income-tax-band shifts.

FAQs on Selling Rental Property Capital Gains

Is selling my rental property capital gains or income? It’s a capital gain unless you’re a property trader flipping multiple units a year—then HMRC may classify it as income.

If you sell rental property is this considered capital gain every time? Nearly always, yes. Only inherited property sold by the estate or properties held in some pensions escape CGT.

How do I calculate capital gain on sale of rental property with joint owners? Work out the total gain, split it by ownership share, apply each person’s allowances and tax bands separately.

Can I pay CGT from the sale proceeds? Yes, but make sure funds remain accessible after mortgages and solicitor fees are cleared so you can pay within 60 days.

What if my numbers change after filing? You can amend the CGT return online within 12 months of the normal Self-Assessment deadline.

Next Steps

1. Download or copy the checklist above.
2. Gather your documents.
3. Decide whether to self-file or let SwiftCGT do it for a fixed fee.
4. Keep every receipt for at least six years.

Ready to beat the deadline? Get your CGT sorted in three working days »

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