Capital Gains Tax (CGT) for landlords in the UK is the tax paid on the profit made from selling a buy-to-let property. The amount of CGT paid depends on the profit made, their income bracket and various tax reliefs. Importantly, the tax is paid on the gain made, not the total amount of money received.
It is a landlord’s responsibility to know the taxes they must pay as part of their activities and, if they sell their rental property, they will need to pay CGT within 60 days of completion.
We know that staying on top of landlord obligations can be complicated. At J Property Management London, we work with landlords all over London and the UK to help streamline their financial and legal responsibilities and make their job as a landlord easy and profitable. If you need some assistance with your landlord responsibilities, get in touch with our team today and see how we can help.
What Is Capital Gains Tax?
Capital Gains Tax (CGT) is a UK tax paid on the profit made when selling an asset that has increased in value since your initial purchase. For UK landlords, CGT applies to the tax paid on the profit made from selling a rental property. The rates are governed by taxable income brackets.
Certain assets are tax-free including your primary residence. Therefore, for property assets, CGT is only paid when selling a rental or buy-to-let property.
If the value of a rental property has increased since you bought it, you may have to pay CGT on the profit when it comes to selling.
The amount paid varies depending on multiple factors including how much the value has increased, the income tax band you are in and if you’re eligible for any available tax reliefs.
How Does Capital Gains Tax Work For Landlords In The UK?
Capital gains tax must be paid by landlords in the UK if they have sold a buy-to-let and made a profit. It is the responsibility of the landlord to notify HMRC and make a payment on the profit within 60 days from the completion date.
If landlords fail to report the sale or make the payment on time, they could end up paying additional interest or penalty fees. This can be made online via the Government Gateway site.
For landlords who usually complete a self-assessment form for their taxes, they will also need to include details of any capital gains on the forms.
Who Has To Pay Capital Gains Tax?
Generally, Capital Gains Tax needs to be paid when you sell something for more than the initial price. You may be liable to pay CGT if you sell the asset, give it as a gift, exchange it for another asset or receive compensation for it.
This includes:
- Property assets that are not a main residence, rental properties or properties used for business
- Some types of shares
- Personal possessions over the value of £6,000 (not including cars)
- Certain business assets.
However, certain exemptions mean that CGT doesn’t always need to be paid. For example, the Private Residence Relief (PRR) means that those who are selling their primary residence will not have to pay CGT on it.
Landlords selling a rental property or any property that isn’t their main residence will be liable for CGT on the ‘gain’ – the difference between the price initially paid for the rental property and the sale price.
How Do You Know How Much Capital Gains Tax To Pay?
In order to know how much CGT to pay, you have to calculate the taxable gain.
Calculate The Taxable Gain
Subtract the original purchase price from the final sales price.
Deduct Costs And Tax Reliefs
Subtract any costs (such as solicitor fees, stamp duty, estate agent fees, renovation work, etc.) and any relevant tax reliefs (including the annual exempt amount of £3,000, Private Residence Relief or Letting Relief) from the total gain.
Taxable Gain
Once you’ve made the above calculations and made any deductions, the remaining profit is your taxable gain. You will pay CGT on this value.
What Are The Rates For Capital Gains Tax For Landlords?
For the 2025/2026 tax year, you will pay 18% CGT on any gain that falls within the basic income tax band or 24% CGT on the full gain or any portion of the gain that falls into the higher or additional rate income tax bands.
What Happens If Landlords Don’t Pay Capital Gains Tax?
If landlords don’t pay CGT, they could face various fines or penalties including late filing penalties of between £100 up to £300 or 5% of the tax due.
They can also receive penalties for inaccurate returns – sometimes up to 100% of the extra tax due if you are caught deliberately trying to conceal your gain.
In addition to penalties, landlords can be charged interest on both the unpaid tax and the penalties, increasing until they pay it back.
Certain cases of deliberate tax evasion could result in significant fines of up to 200% of the tax owed or even being sent to prison by HMRC.
Capital Gains Tax Exemptions For Landlords
Being a landlord in the UK, you may not always have to pay Capital Gains Tax.
No Gain
If you sell a rental property for less than the purchasing price, you won’t pay CGT.
Balancing Out The Deductibles
If after calculating the allowable deductibles you find that the property’s ‘gain’ is under your personal annual allowance of £3,000, you won’t need to pay CGT.
Limited Company
If you are set up as a limited company rather than an individual landlord, your profits will pay corporation tax rates rather than CGT.
Private Residence Relief
If the property was your primary residence at any point, you can benefit from a tax relief for the period that you were living there, as well as the final nine months of ownership.
Letting Relief
This relief is available if you lived in the property and had tenants or lodgers living there at the same time.
Landlord Compliance Made Easy With J Property Management
Juggling landlord responsibilities and obligations can cause a lot of headaches. At J Property Management, we handle the difficult stuff for you so that you can just enjoy the profit from your property investment. Whether you need full property management services or just some extra help with certain landlord obligations, we can help.
Contact us today to get started!
