Selling a Rental Property in 2026: CGT, the 60-Day Rule and How to Reduce Your Bill

Quick answer

Selling a buy-to-let property in 2026 triggers Capital Gains Tax on the profit. With the higher CGT rate at 24% for residential property, a large gain can create a substantial tax bill. But the amount you owe depends critically on how you structure the sale, whether you owned it jointly, your other income in the year, and whether you ever lived in the property.

This guide takes you through a complete CGT calculation, the 60-day reporting rule, and five strategies to legally reduce your liability.

CGT rates on residential property in 2026/27

The Autumn Budget 2024 increased CGT rates on most assets but left residential property rates unchanged from the post-October 2024 position:

For context, other assets (shares, etc.) are taxed at 18%/24% too from October 2024, having been raised from 10%/20%. Residential property had already been at the higher level.

To determine which rate applies to you:

1. Add together all your taxable income for the tax year (salary, rental income, dividends, etc.).
2. Subtract the Personal Allowance (£12,570).
3. If the result is below the higher-rate threshold (£50,270), the portion of your gain that fits in the remaining basic-rate band is taxed at 18%. Any excess is taxed at 24%.
4. If your income already exceeds £50,270, the entire gain is taxed at 24%.

Full worked CGT calculation

The scenario: Richard bought a rental flat in 2015 for £120,000. He paid £3,500 in solicitor and survey costs. He later spent £15,000 extending the kitchen (capital improvement, not repairs). He sells in May 2026 for £280,000, paying £3,000 in estate agent fees and £2,000 in legal fees.

Richard is a higher-rate taxpayer (salary of £60,000).

Step 1: Calculate the gain

Note: routine repairs and maintenance are not deductible from the gain — they are allowable expenses against rental income, not CGT. Only genuine capital improvements (extensions, new fitted kitchens where there was none, conversions) are deductible.

Step 2: Deduct the Annual Exempt Amount

Step 3: Calculate CGT

Richard is a higher-rate taxpayer, so the entire taxable gain is charged at 24%:

This is a substantial sum — and Richard must pay it within 60 days of the completion date.

What if Richard were a basic-rate taxpayer?

If Richard earned £30,000 (within the basic-rate band), his remaining basic-rate band space is approximately £50,270 − £30,000 + £12,570 = £32,840. The first £32,840 of the gain would be taxed at 18% (£5,911), and the remaining £100,660 at 24% (£24,158), for a total of £30,069. Still substantial, but about £2,000 less.

The 60-day reporting rule in detail

Since April 2020, any disposal of UK residential property that results in a chargeable gain must be:

1. Reported to HMRC within 60 days of the completion date.
2. Paid (estimated CGT based on in-year position) within the same 60-day window.

This is done through HMRC's online service: gov.uk/report-and-pay-your-capital-gains-tax

You need a Government Gateway account to access the service. If you do not have one, create it before you complete the sale — leaving it until the last minute is risky.

What if you are not sure of your final tax position?

You must make a reasonable estimate of the CGT payable. HMRC acknowledges that at the point of reporting, you may not have your full income picture for the year (e.g., if you sell in May and will not know your total income until April 2027). You should estimate based on your expected income. When you later file your Self Assessment return (by January 2028 for 2026/27 disposals), HMRC reconciles the interim payment against your final liability. You may owe more, or receive a refund.

Penalties for missing the 60-day deadline

Additionally, interest accrues on unpaid CGT at the current HMRC rate of 7.5% per annum from the day after the 60-day deadline. On a £32,040 CGT bill, 7.5% interest is £2,403/year — significant motivation not to delay.

Five strategies to reduce your CGT bill

Strategy 1: Transfer to spouse before sale (save up to £3,000+)

A transfer between spouses or civil partners is free of CGT (it takes place at a "no gain, no loss" price). If the property is in your sole name, you can transfer a share to your spouse before selling. Your spouse then benefits from:

• Their own Annual Exempt Amount (£3,000) — saving up to 24% × £3,000 = £720
• Potentially lower CGT rate if they are a basic-rate taxpayer — saving 6% on any gain falling in their basic-rate band (potentially several thousand pounds)
• Their own set of any reliefs (e.g., PPR if they also lived there)

Important: HMRC scrutinises pre-sale transfers to spouses for "arrangements" that lack substance. The transfer should happen before exchange of contracts, and your spouse should have genuine ownership of their share.

Strategy 2: Time the disposal across April 5th

If you can split the completion date to fall in two different tax years — for example, exchange in March and complete in April — you might be able to use two years' Annual Exempt Amounts. However, CGT is triggered by completion, not exchange, so you need completion to straddle 5 April.

Practically, this requires the buyer to agree to a delayed completion. But if it works, you gain a second AEA (£3,000 extra at 24% = £720) and potentially use two years' basic-rate band.

Strategy 3: Make pension contributions to reduce the higher-rate band

Pension contributions increase your basic-rate band. For every £1 of gross pension contribution, the basic-rate band expands by £1. If your income plus the gain sits in the higher-rate band, increasing your pension contribution can shift some of the gain down to 18%.

Example: Richard (above) makes a £20,000 gross pension contribution in 2026/27. His threshold rises from £50,270 to £70,270. Since his salary is £60,000, he has £10,270 of basic-rate band space above his salary — meaning £10,270 of the property gain is taxed at 18% rather than 24%.

Saving: 6% × £10,270 = £616. The actual saving is modest compared to the pension benefit, but it is real money.

Strategy 4: Offset capital losses from other assets

Capital losses from shares, cryptocurrency, or other assets sold in the same tax year can be set against property gains. If you have shares that have fallen in value, selling them in the same year as the property creates a loss that reduces the taxable gain pound for pound.

This is entirely legitimate — HMRC does not distinguish between "good" and "bad" reasons for selling an asset. You can carry forward losses from previous years too, though you must use in-year losses first.

Strategy 5: Use Principal Private Residence Relief if you ever lived there

PPR is the most powerful CGT relief available. If the property was at any time your main home, the gain attributable to the period of residence (plus a 9-month final period) is entirely exempt.

Worked example with PPR:

Richard bought the flat in January 2015 and lived in it as his main home until December 2017 — 3 years. He then let it out from January 2018 until selling in May 2026 — 8.5 years. Total ownership period: 11.5 years (138 months).

PPR qualifying period:

• Period of actual occupation: 36 months
• Final 9-month exemption period (regardless of actual occupation): 9 months
• Total PPR qualifying period: 45 months

PPR fraction = 45 ÷ 138 = 32.6%

This compares to the £32,040 without PPR — a saving of £10,920 from three years of prior residence.

Note on the final 9 months: The final 9-month period is always exempt — you do not need to have lived there in those last 9 months. It is automatically included in your PPR calculation.

What was letting relief?

Before April 2020, landlords who had lived in a property before letting it could claim letting relief of up to £40,000 per person, on top of PPR. This was a very valuable relief. It was abolished for most landlords from April 2020 and replaced with a much more restricted version: letting relief now only applies if you share the property with the tenant (live-in landlord).

For anyone selling a standalone buy-to-let property where they have not shared occupancy with tenants, letting relief is not available in 2026. Do not include it in your calculation.

How to report

1. Go to gov.uk/report-and-pay-your-capital-gains-tax
2. Sign in to your Government Gateway account (create one if needed)
3. Provide details: completion date, sale price, costs, any reliefs claimed
4. HMRC calculates your estimated liability
5. Pay via the online service (debit card, bank transfer, or via your Self Assessment account if you have one)
6. You will receive a confirmation reference — keep it for your records
7. When you file your Self Assessment return (by 31 January 2028 for 2026/27 disposals), include the disposal in the Capital Gains pages and reference your earlier payment

Frequently asked questions

Do I still need to report if I make a loss on the property?

Yes — if you are UK resident and sell a UK residential property, you must still report the disposal to HMRC within 60 days even if there is no gain or you make a loss. However, no CGT payment is required for a loss. Losses are registered and can be offset against future gains.

What if there is a significant gap between exchange and completion?

CGT arises on completion, not exchange. However, if more than a year passes between exchange and completion, HMRC may argue the effective date of disposal is the exchange date. In practice, completion dates within 6 months of exchange are treated as the completion date. For unusual situations, seek professional advice.

Can I defer CGT using HMRC's Time to Pay arrangement?

No — HMRC's Time to Pay service for Self Assessment does not apply to the 60-day property CGT payment. You must pay in full within 60 days. If you genuinely cannot raise the funds, contact HMRC's Payment Support Service (0300 200 3835) before the deadline — do not simply miss it.

I am non-resident — do the same rules apply?

Non-resident landlords selling UK residential property are also subject to UK CGT on gains since April 2015. The reporting and payment rules are the same: 60-day window, HMRC online service. Non-residents should take advice on any double tax treaty implications.

What records do I need to keep?

Keep all purchase documents (conveyancing completion statement, mortgage agreement), receipts for capital improvements, records of any periods of personal occupation, and the sale completion statement. CGT enquiries can be opened up to 4 years after the filing date, so retain records for at least 6 years from the date of disposal.