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Landlords and Capital Gains Tax for Rental Properties

As a landlord you will gain passive monthly rental income from your buy to let and capital appreciation as the years flit pas; it’s exactly this capital appreciation that Capital Gains Tax (CGT) applies to. If you decide you want to cash in on that capital appreciation by finally selling your buy to let, then you will have to pay tax on a percentage of the profits you made from the sale of the property. 

With this being said, landlords will not have to pay a tax on all their profits as the UK government permits a personal tax allowance that is currently held at £12,300. Any earnings that exceed this threshold will be taxable. 

Are Rental Properties Subject to Capital Gains Tax? PropertyLoop

How Much Is Capital Gains Tax? 

The amount of capital gains tax a landlord must pay upon the sale of their rental property is largely dictated by two factors; the total profit they saw from the sale of the rental, alongside the appropriate capital gains tax rate that the landlord would be charged.  

The specific rate at which the landlord would be charged capital gains tax will be determined by their income, with this being tallied alongside the taxable profit from the property sale to calculate the appropriate capital gain tax band. 


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Landlords that fall within the standard tax bracket will pay 18% on the profits from the sale of their rental property above £12,300. Alternatively, if they are found to be a higher or additional tax payer, then the tax percentage figure increases to 28%.   

Are Rental Properties Subject to Capital Gains Tax?

to the dismay of landlords, capital gains tax must still be paid when selling a rental property, but that doesn’t mean that the amount you must pay cant be dramatically reduced.

How Do You Avoid Paying Capital Gains Tax on a Buy to Let?   

To be clear landlords are legally obligated to pay capital gains tax upon the sale of their property and it cannot be avoided. However, the amount of CGT landlords will have to pay can be significantly reduced through deductions. Landlords are not only permitted to make deductions accounting for any stamp duty rates that were paid when purchasing the rental but also estate agency and solicitor fees as these are all unavoidable costs that come with transacting a property.  

Providing that these costs have not been deducted during annual tax returns, upon the sale of their property and the inevitable CGT payment, landlords can deduct any costs incurred when making improvements to the property, such as installing a new boiler, having new appliances in the kitchen or fitting insulation.  

With this being said it is important for landlords to note that they will not be able to make any deductions on their CGT exposure through the associated costs of repairing or maintaining their rental property, or any interest payments on their buy to let mortgage.  

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What Is Private Residence Relief? 

If the landlord has used the rental property being sold as their main residence, they may be applicable to receive partial relief on their CGT payment. If this is the case landlords will not be required to pay any capital gain tax for the period that they resided within the rental property. Further to this, owners will not be held liable to pay any CGT for the final nine months that they owned the property. 

When Should Capital Gains Tax Be Paid? 

Once the rental property has been sold by the landlord, HMRC must be notified within 30 days, alongside the appropriate payment being made. This deadline will commence from the date the sale of the property is completed. If the owner fails to settle their capital gains tax by this time, they are likely to incur heavy financial penalties and interest charges.  

In order to pay the capital gains tax landlords must go online and use the Government Gateway, with anyone that would typically file a self-assessment tax return providing these details alongside any capital gain made in the appropriate tax period.  

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