Selling your BTL property – things to look out for
If you are thinking of selling up your properties for any reason (including transferring them to a limited company), it’s essential that you get specialist tax advice beforehand.
It’s because the rules are very different to those which apply when you sell your own home. When you sell a home that has been your only or main residence throughout the period of ownership, you qualify for private residence relief (except in rare circumstances) – which means you don’t pay Capital Gains Tax (CGT).
Capital Gains Tax on buy-to-let properties
If you sell a property that you have rented out, you may have to pay Capital Gains Tax. The gain is not simply the sale price less the purchase price. Deduct allowable acquisition and disposal costs and qualifying capital improvement expenditure, then apply any available losses, reliefs and annual exempt amount. Mortgage repayments and routine repairs are not part of this Capital Gains Tax calculation.
If you are a higher-rate taxpayer, the bill will be calculated like this:
Gain: £150,000
Less: tax-free allowance (annual exempt amount, 2026/27): £3,000
Taxable gain: £147,000
CGT at 24%: £35,280
This assumes the whole taxable gain falls above the unused basic-rate band and ignores other gains, losses and reliefs.
If you are a basic rate taxpayer, you calculate your CGT in this way:
- Work out your total taxable income (i.e. your income minus your income tax personal allowance and other reliefs you are entitled to)
- Work out your total taxable gains
- Deduct your CGT tax-free allowance (£3,000) from your total taxable gains
- Add this amount to your taxable income
- For 2026/27, compare the gain with the unused part of the £37,700 basic-rate band. The portion within that unused band is taxed at 18% and the balance at 24%. The £12,570 Personal Allowance is dealt with when calculating taxable income; it is not added to the CGT basic-rate band.
If taxable income is £25,000 and the gain before the annual exempt amount is £150,000, the taxable gain is £147,000. The unused basic-rate band is £12,700 (£37,700 ? £25,000). CGT is £2,286 on that portion at 18%, plus £32,232 on the remaining £134,300 at 24%: £34,518 in total. This ignores other gains, losses and reliefs.
Have you lived in the property?
Private Residence Relief may cover periods when the property was genuinely your only or main residence, certain qualifying absences and generally the final nine months of ownership. In limited cases, the final 36 months may qualify for a disabled person or care-home resident. Relief depends on the facts and is apportioned where the property qualified for only part of the ownership period.
In a simplified example, assume that a property was owned for exactly 18 years, occupied as the only or main residence for the first 12 years and then wholly let for six years. The qualifying period would normally be 12 years plus the final nine months: 12.75 years, or 70.833% of the ownership period. On a £150,000 gain before relief and other deductions, £106,250 would qualify for Private Residence Relief and £43,750 would remain before applying allowable losses, the annual exempt amount or any other relief.
Lettings relief
Lettings Relief is now limited to cases where the owner and tenant occupied different parts of the home at the same time. It does not apply merely because the whole property was let after the owner moved out. Where available, the relief is the lowest of £40,000, the Private Residence Relief already calculated and the chargeable gain made while part of the home was let.
Selling a company-owned property
A UK company normally includes a chargeable gain on the property disposal in its Corporation Tax calculation. ATED-related Capital Gains Tax applied only to disposals up to 5th April 2019 and no longer exists.
The separate Annual Tax on Enveloped Dwellings regime may still apply where a company or other non-natural person owns a UK dwelling worth more than £500,000. Property rental relief may reduce the charge to nil where its conditions are met, but the relief must be claimed in an ATED return or Relief Declaration Return.
In summary, before you sell a buy-to-let property, be aware that you may have to pay a significant amount of tax on your gains. Always get advice – you may find that it would be a more profitable move to hold on to a property for a number of years.
In the next section, we’ll show you how THP can help you with your whole buy-to-let portfolio.
Report and pay Capital Gains Tax within 60 days
A UK resident who disposes of UK residential property and has Capital Gains Tax to pay must normally report the disposal and pay the tax within 60 days of completion. If they are registered for Self Assessment, they must also include the disposal on the relevant return. Do not wait for the annual return before checking the 60-day obligation.
More in this series:
- Making Buy-to-Let More Profitable
- Why Buy-to-Let Profits are Under Pressure
- Should I transfer my BTL properties into a limited company?
- Could transferring rental property to your spouse or civil partner reduce your tax bill?
- How to improve Buy-to-Let income
- Personal Buy-to-Let mortgages & re-mortgages – the facts
- Selling a buy-to-let property: tax points to check
- How THP can help you as a Landlord
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How THP can help you as a Landlord
The information included on this page should be regarded as general advice only. You should always seek professional advice tailored to your own specific circumstances before taking any action based upon it.
