Selling a Rental Property: Full CGT Worked Example (2026/27)

The full CGT calculation, step by step

Working out CGT on a rental property sale follows a consistent structure: start with the sale price, deduct allowable costs and any reliefs, apply the annual exempt amount, then apply the correct rate based on your income tax band. Below is a complete worked example following every step.

Worked example: David sells his buy-to-let flat

David bought a flat as a pure buy-to-let investment (he never lived in it) for £180,000 in 2016, incurring £3,000 in stamp duty and legal fees at purchase. In 2026 he sells it for £320,000, paying £6,000 in estate agent fees and £1,500 in legal fees on the sale. He also spent £15,000 on a loft conversion in 2019, which added usable living space (a genuine capital improvement, not a repair).

Step 1 — calculate the gain:

Step 2 — apply the annual exempt amount:

• £114,500 − £3,000 (annual exempt amount) = £111,500 taxable gain

Step 3 — apply the CGT rate. David is a higher-rate taxpayer, so the full gain is taxed at 24%:

• £111,500 × 24% = £26,760 CGT due

Step 4 — report and pay within 60 days of completion via the UK Property Reporting service, well ahead of his annual Self Assessment deadline.

Worked example 2: A property that was once David's home

Suppose instead David lived in the same flat as his main residence for the first 4 years (48 months) of a 10-year (120-month) ownership period, then let it out for the remaining 6 years before selling with the same £114,500 gain before reliefs.

• Private Residence Relief applies for the 48 months he lived there, plus the final 9 months of ownership regardless of use (a standard rule), = 57 months of relief out of 120 months total ownership
• Relief proportion: 57 ÷ 120 = 47.5%
• PRR-exempt gain: 47.5% × £114,500 = £54,388
• Remaining taxable gain: £114,500 − £54,388 = £60,112
• Less annual exempt amount: £60,112 − £3,000 = £57,112
• CGT at 24%: £13,707

Compare this to the £26,760 David owed as a pure investor in worked example 1 — living in the property for part of its ownership roughly halves his CGT bill in this scenario, purely through Private Residence Relief.

Worked example 3: Jointly owned property and using both exempt amounts

Sarah and Michael jointly own a rental property (50/50) and realise a combined gain of £80,000 on sale.

• Each owner's share of the gain: £40,000
• Each deducts their own £3,000 annual exempt amount: £37,000 taxable each
• Sarah is a basic-rate taxpayer (some of her gain falls in her remaining basic-rate band): assume £20,000 taxed at 18% and £17,000 at 24% = £3,600 + £4,080 = £7,680
• Michael is a higher-rate taxpayer, so his full £37,000 is taxed at 24% = £8,880
• Combined household CGT: £16,560

Compare this to a hypothetical sole-owner scenario with the same £80,000 gain, using only one £3,000 exempt amount: £77,000 all at 24% (assuming higher rate) = £18,480 — joint ownership saved this couple £1,920 simply by using two exempt amounts and Sarah's available basic-rate band.

Comparing CGT outcomes across scenarios

Planning ahead of a sale

Before selling, use a CGT Property Calculator to model your specific numbers, including any Private Residence Relief period, and a Capital Gains Tax Calculator to check how your other income and gains in the same tax year affect your rate. If you are still deciding whether to sell or continue letting, a Buy-to-Let Calculator can help you compare ongoing rental returns against a one-off sale.

Sources

• gov.uk: Capital Gains Tax on property
• gov.uk: Report and pay Capital Gains Tax on UK property within 60 days
• gov.uk: Private Residence Relief