Capital gains tax on selling a rental property
What you would pay in capital gains tax on selling a rental property, how much cash you would have once the mortgage and the tax are paid, and how joint ownership changes it.
How this is calculated
The gain is the sale price less selling costs, the purchase price, buying costs and capital improvements. Repairs, redecoration and mortgage interest cannot be deducted from the gain.
Each owner deducts any losses brought forward and the £3,000 annual exempt amount. What is left is taxed at 18% while it fits in the owner's unused basic rate band and at 24% above that. The basic rate band uses UK thresholds, including for Scottish taxpayers.
Residential property gains must be reported to HMRC, and the tax paid, within 60 days of completion. Private residence relief, for a property that was ever your main home, is not included.
Rates and assumptions used
| Annual exempt amount | £3,000 per person |
| Rate within the basic rate band | 18% |
| Rate above it | 24% |
| Basic rate band | £37,700 of taxable income |
| Reporting and payment | within 60 days of completion |
Statutory rates last checked July 2026. Source: HMRC and gov.uk.
Worked example
A flat bought for £180,000 with £8,000 of buying costs and £10,000 of improvements sells for £275,000 with £5,000 of selling costs: a gain of £72,000. With £45,000 of other income, £5,270 of the taxable gain falls in the basic rate band at 18% and the remaining £63,730 is taxed at 24%, so the tax is £16,244. Owned 50:50 with a partner earning £25,000, the two bills come to £7,604 and £6,404, a total of £14,008, saving £2,236.
Common questions
Can I deduct the mortgage?
No. Repaying the mortgage reduces the cash you receive, but it does not reduce the gain. Only the costs of buying, selling and improving the property are deducted.
Does owning jointly help?
Often. Each owner has their own £3,000 exemption and their own basic rate band, so a gain split between two people can be taxed less than the same gain in one name. Transfers between spouses and civil partners are generally tax neutral, but take advice before making one shortly before a sale.
What if I lived in it?
Private residence relief can exempt the part of the gain for the time it was your main home, plus the final nine months. It is not included here; HMRC has a calculator and guidance on gov.uk.
Does a company pay capital gains tax?
No. A company pays corporation tax on the gain instead, with no annual exempt amount.
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