Should I Sell My Buy-to-Let in 2026? The Tax Math

Quick answer

By 2026, owning a UK buy-to-let as an individual has become structurally harder than at any point since the 1990s. Section 24, the 5% SDLT surcharge, the £3,000 CGT allowance, and looming EPC band C requirements all push the net return curve down. At the same time, the CGT rate on residential property fell to 24% on 6 April 2024, making exits cheaper.

For many leveraged single-property landlords, the maths in 2026 says: sell, redeploy into ISA/SIPP.

The 2026 BTL headwinds

1. Section 24

Since 2020/21, individual landlords cannot deduct mortgage interest as an expense. Full rent counts as income, then a 20% basic-rate tax credit is applied to interest costs. For higher-rate taxpayers this means tax on income that effectively goes to the lender.

See our Section 24 glossary entry for the mechanics.

2. The 5% SDLT surcharge

Since 31 October 2024, additional-dwelling purchases pay 5% SDLT surcharge (up from 3%). This doesn't affect a current owner selling — but it hits the pool of potential buyers, narrowing demand to:

• Owner-occupiers (who don't pay the surcharge).
• Incorporated portfolios (who pay it but can deduct interest).

For non-resident BTL buyers, 2% on top of 5% stacks — see our SDLT foreign buyer surcharge post.

3. £3,000 CGT allowance

The Annual Exempt Amount fell from £12,300 (2022/23) to £6,000 (2023/24) to £3,000 (2024/25 and 2025/26). On a £70,000 gain, you now shelter just 4% of it — vs ~17% three years ago.

4. EPC band C by 2030

The Government plans to require all new tenancies to be in properties rated EPC C or above from 2028, and all existing tenancies from 2030. Many BTLs are currently D or E — typical retrofit (insulation, heating upgrade) costs £6,000–£15,000.

5. The CGT rate change makes selling cheaper

From 6 April 2024 the higher rate of CGT on residential property fell from 28% to 24%. On a £70,000 gain that's £2,800 less tax — a small but real saver for higher-rate landlords exiting in 2025/26.

Worked example — Tom's £250,000 flat

Tom bought a flat in Bristol for £180,000 in 2018, took out a £135,000 BTL mortgage at 75% LTV. He's now an additional-rate taxpayer.

Current position (hold scenario)

Annual numbers:

• Rent: £14,400 (£1,200/month).
• Mortgage interest: £6,750 (5% on £135,000 IO).
• Other costs (mgmt 10%, repairs, insurance, gas safety): £2,640.
• Net rent before tax: £14,400 – £6,750 – £2,640 = £5,010 (true economic figure).
• For HMRC: income £14,400 – allowable expenses (excluding interest) £2,640 = £11,760. Tax at 45% = £5,292. Mortgage interest relief credit: 20% × £6,750 = £1,350.
• Net of HMRC: £14,400 – £2,640 – £6,750 (real) – £5,292 (tax) + £1,350 (credit) = £1,068/year.
• Yield on £180k equity (less mortgage): £45,000 equity → 2.4% net yield.

Tom is making £1,068/year on £45,000 of equity tied up in the property — equivalent to leaving the money in a Cash ISA at 2.4%.

Sale scenario (sell at £250,000)

Capital gain:

• Sale price: £250,000.
• Cost: £180,000.
• Selling costs (agent 1%, legal): £3,500.
• Net gain: £250,000 – £180,000 – £3,500 = £66,500.
• Less Annual Exempt Amount: £3,000.
• Taxable gain: £63,500.
• CGT at 24%: £15,240.

Mortgage redemption: £135,000.

Net cash to Tom:

• £250,000 – £15,240 CGT – £135,000 mortgage – £3,500 selling costs = £96,260.

After bank deposit of the existing £45,000 equity sitting on the property, Tom has freed up £96,260 for redeployment.

Redeployment

If Tom puts the £96,260 to work:

• £20,000 immediately into ISA (current tax year).
• £20,000 into next year's ISA.
• £60,000 into a SIPP (45% tax relief on first £60,000 = effectively costs him £33,000 of net cash; £27,000 of free relief, plus tax-free growth).
• Remainder in a general investment account.

Over 10 years at 6% real growth, his £96,260 becomes roughly £172,000 in real terms — significantly more than the locked-up BTL was generating.

When to hold instead

The BTL maths still works in specific cases:

1. Unencumbered BTL (no mortgage) — Section 24 doesn't bite, net yield is the full rent minus costs.
2. Property already EPC C+ — no retrofit cost ahead.
3. High capital growth area — London zones 2–3, parts of South East. Capital gains can still outpace tax burden.
4. Basic-rate taxpayer landlord — 18% CGT, 20% income tax. Section 24 effectively neutral.
5. Owned 20+ years — emotional and historical attachment, very low cost basis, often the family inheritance plan.

For a clearer hold-vs-sell number cruncher see Buy-to-let vs REIT and buy-to-let viability.

Alternatives to outright sale

Incorporation

Transfer the property to a limited company you own. Limited companies still deduct full mortgage interest. But:

• The transfer is a "disposal" for CGT — so you pay 24% on the gain at the transfer date.
• It triggers SDLT for the company purchaser, including the 5% additional surcharge.
• Incorporation Relief (TCGA s.162) can defer CGT only if the property business meets the strict "business" test (typically 4+ properties).

For most single-property landlords, incorporation in 2025/26 is more expensive than selling.

Furnished Holiday Let (FHL)

The FHL regime — which allowed full interest deduction, BADR-on-sale and pension contributions — ended on 6 April 2025. Properties remain valid short-term lets but lose all FHL tax advantages from 2025/26 onwards.

Refinance and hold

If your fix is rolling off and rates are still 5%+, refinancing onto a longer 5-year fix at current pricing may give cash-flow certainty. The economics still depend on Section 24 — won't change the headline maths.

Switch to owner-occupier (live in it)

For some landlords selling a former main home, Private Residence Relief can still partially apply if the property was lived in during the ownership period. This shelters part of the gain.

The 60-day reporting trap

UK residents selling residential property with a CGT liability must:

1. File a Property CGT return within 60 days of completion via the HMRC Online Property Account.
2. Pay the estimated CGT within the same 60 days.
3. Reconcile via Self Assessment at year-end.

Penalties for late filing: £100 fixed + daily charges + tax-geared penalty. Many landlords still miss this — see CGT on second home / BTL for the full process.

The simplified decision tree

1. Are you a basic-rate taxpayer with no mortgage? → Hold. Numbers usually work.
2. Higher-rate, mortgaged, single property? → Strong case to sell.
3. Portfolio of 4+ properties? → Consider incorporation; do the modelling.
4. EPC D/E with no plan to upgrade? → Sell before 2028.
5. Long-held family asset with high capital gain? → Consider Holdover Relief into trust, or hold until death (CGT wiped, IHT applies).

Try the numbers

Sources

• HMRC: Tax when you sell property
• HMRC: Capital Gains Tax rates 2025/26
• HMRC: Restricting finance cost relief for individual landlords (Section 24)
• HM Treasury: Autumn Budget 2024 — SDLT and CGT changes
• DESNZ: Improving the energy performance of privately rented homes