Capital Gains Tax (CGT)
Quick answer
Tax on the profit from selling a rental property. From April 2024 the CGT annual exempt amount was reduced to £3,000 and residential property gains are taxed at 18% (basic rate) or 24% (higher rate). A CGT return must be filed and tax paid within 60 days of completion.
At a glance
- Annual exempt amount
- £3,000 (from April 2024)
- Rates (residential)
- 18% basic / 24% higher
- Filing window
- 60 days from completion
- Return type
- HMRC Residential Property Return
Full guide
Read the complete landlord guide on Capital Gains Tax (CGT)
Deadlines, fines and step-by-step compliance in our in-depth resource.
Open full guideWhy Capital Gains Tax (CGT) matters for landlords
CGT is the tax landlords most often get wrong because the 60-day residential property return is separate from the self-assessment cycle. Miss it and you are straight into penalties and daily interest. The shrinking annual exempt amount (£3,000) plus the 18% / 24% rate split means any gain above a small slice is taxable, and gains over multiple ownership years need to be apportioned to reflect letting versus primary-residence periods.
Tracked inside LetCompliance
Stop tracking Capital Gains Tax (CGT) in spreadsheets
LetCompliance scores every property 0–100 across Gas Safety, EICR, EPC, deposits, Right to Rent and Fire Risk — with deadline reminders 90/30/14/7/1 days out and a exportable PDF proof you can export in one click. Built for UK landlords + letting agents.
Official sources
LetCompliance editorial reviews this entry every quarter against the sources above. Always confirm specific duties with a qualified solicitor or your local council.
Related terms
Capital Allowances
Tax relief for capital spending on qualifying "plant and machinery". For a standard residential letting they are generally NOT available — furniture and appliances are covered instead by Replacement of Domestic Items Relief. Capital allowances mainly apply to equipment in the communal areas of some HMOs and to commercial property; the furnished holiday let regime that allowed them was abolished from April 2025.
Furnished Holiday Let (FHL)
A short-let property meeting the FHL availability and letting tests (210 days available, 105 days actually let, etc.). Treated as a trade for tax purposes until 5 April 2025, with full mortgage interest deduction, capital allowances on furniture and fittings, and Business Asset Disposal Relief on sale. From 6 April 2025 the FHL regime was abolished by the Finance Act 2024: existing FHLs fall under standard property income rules and Section 24 mortgage interest restriction applies in full.
Capital Expenditure vs Revenue Expenditure
The line that decides whether a cost reduces your rental profit now or your Capital Gains Tax later. Revenue expenditure (repairs, maintenance, replacing like-for-like) is deducted from rental income in the year you spend it. Capital expenditure (improvements, extensions, first-time installation of something new) is added to the property’s cost base and only counts against CGT when you sell.
Capital Growth
The increase in a property’s market value over time, as distinct from the rental income it produces. It is only realised (and taxed, via Capital Gains Tax) when the property is sold. Many landlords weigh capital growth against rental yield when choosing where and what to buy.
Interest-Only Mortgage
A mortgage where the monthly payment covers only the interest, leaving the original capital to be repaid at the end of the term. Most buy-to-let mortgages are interest-only because it maximises monthly cashflow and, historically, the tax treatment of interest. The capital must still be repaid eventually — usually by selling or remortgaging the property.
BTL (Buy-to-Let)
A mortgage product and business model where a property is purchased specifically to rent out. Buy-to-let landlords are subject to Section 24 of the Finance Act 2015, which replaced mortgage interest relief with a 20% tax credit. Stamp duty is higher on a second property.