2025 CGT Rules for Buy-to-Let – What Landlords Need to Know

Thinking of selling a rental property this year? The headline price is not the number that matters. What counts is your net cash after fees, redemption, and CGT, and how that compares to a refinance or partial sell-down. This guide explains the 2025 Capital Gains Tax (CGT) rules that affect landlords and shows how to plan before you list.

Companion guides

Use these alongside this piece to run the numbers and sense-check decisions:

Exit, Refinance or Rebalance? A Decision Framework for Landlords 

Net Proceeds Calculator: How Much Will You Really Have After Selling?  

Partial Sell-Down and Debt Re-basing

The rates and allowance in brief (2025)

• Residential property CGT: 18% within the basic-rate band; 24% above that.
• Annual Exempt Amount: £3,000 per individual (most trusts £1,500). Unused AEA is not carried forward.

Who pays CGT when selling a rental

• Buy-to-let, second homes and most inherited rentals are within scope of CGT.
• Private Residence Relief (PRR) generally does not apply to a property that has never been your only or main residence.
• Letting relief is now very narrow – typically only where you lived in the home at the same time as the tenant. Standard buy-to-lets do not qualify.

How CGT is actually calculated

1. Gain = Sale proceeds (net of selling costs) − (purchase price + stamp duty/LBTT/LTT + legal/agents on purchase) − capital improvements (extensions, new kitchen units where it enhances, not repairs).
2. Apply losses and AEA: set brought-forward losses against gains; deduct your Annual Exempt Amount.
3. Apply rates: Work out how much of the gain sits in your basic-rate band (18%) and how much above it (24%). Joint owners compute their shares separately.

Important: improvement vs repair is a common trap. Capital improvements are usually allowable; routine maintenance is not.

Timing rules that change the answer

• Tax year is set at exchange on an unconditional contract (not completion). This matters for band planning and using two tax years.
• 60-day reporting and payment runs from completion for UK residents when CGT is due. If a disposal generates no CGT, the 60-day return is not required. Non-residents must report all UK property disposals.
• ERC step-downs and fixed-rate maturities can materially change net proceeds. Check the timetable before you list.

Allowable costs landlords often miss

• Incidental costs of acquisition and disposal (agents, legal, search fees, certain marketing) where directly attributable.
• Capital improvements that enhance or add to the property (with invoices). Decorating and like-for-like repairs are usually not capital.
• Apportioned costs on lease extensions and enfranchisement where relevant.

Spreading and sharing the gain legitimately

• Two tax years: exchanging some contracts before and some after 5 April can use allowances twice and manage income bands (market practicalities apply).
• Spouse/civil partner transfers: no gain/no loss when living together means you can share ownership before sale to use two Annual Exemption Allowances (AEA’s) and possibly basic-rate bands. The transfer must be real – update beneficial ownership and records.

Worked example – higher-rate taxpayer (illustrative)

• Sale price £300,000; agent 1.5% (£4,500); legal £1,500 ⇒ net sale proceeds for CGT = £294,000.
• Purchase £200,000 + SDLT/fees £3,000; capital improvements £10,000.
• Gain = £294,000 − (£200,000 + £3,000 + £10,000) = £81,000.
• AEA used elsewhere; no losses. CGT at 24% = £19,440.

Net proceeds after tax will also depend on mortgage redemption and any ERCs. See the Calculator article for the full cash picture.

Worked example – joint owners, mixed bands (illustrative)

• Same facts, 50:50 ownership. Gain £81,000 ⇒ £40,500 each.
• Each uses AEA £3,000 ⇒ taxable £37,500 each.
• Owner A has basic-rate headroom: part at 18%, remainder at 24%. Owner B fully at 24%. Total CGT typically lower than single ownership.

Reporting and paying (what to do, when)

• Within 60 days of completion (UK residents with CGT to pay): report via the CGT on UK Property account and pay the amount due.
• Self Assessment: include the disposal on your return. HMRC reconciles the 60-day payment against final CGT once all gains/losses for the year are known.
• Non-residents: report all UK property disposals within 60 days even if no CGT is due.

Pre-sale checklist for landlords

• Pull an AVM and sense-check values with your agent
• Estimate selling costs (agent, legal, compliance, works)
• Confirm mortgage balance and any ERC timetable
• Assemble base cost and capital improvement evidence
• List losses, your AEA position, and ownership splits
• Decide whether to stage exchanges over two tax years
• Prepare a sell vs refinance comparison before you commit

How we help

Our consultation service covers de-leveraging, retirement planning, business continuity and legacy planning for landlords. The process is written, structured and client-led. It is not a phone call. We base our recommendations on a conditional-logic Fact Find followed by focused email exchanges. Your inputs drive the analysis and the priorities. Our role is to organise the options, test commercial feasibility, and document an implementation plan that your own accountant, solicitor and regulated adviser can execute.

Scope of topics we cover

• Business continuity and lender management, including target LTV setting and liquidity buffers
• Succession and legacy planning that keeps control tidy, including equalising between children without selling core assets
• Structuring options such as LLP governance, company housekeeping and Family Investment Company considerations, with clear signposting to legal drafting where needed
• Life insurance trust and loan-back mechanics, including trustee duties, loan terms and security options
• Refinancing pathways, broker briefing notes, and the documents underwriters expect to see
• Valuations approach using AVMs for portfolio snapshots and when to commission a full valuation
• Director loan accounts and intra-group balances, with tidy-up options before, during and after an owner’s death
• Insurance strategy at a commercial level, including whole of life sizing logic and ownership routes, with referral to a regulated adviser for product selection
• Governance pack items such as shareholders’ agreements, members’ agreements, Wills and LPAs, flagged for your solicitor to draft or update

How it works

• You complete our conditional-logic Fact Find and property schedule
• We follow up by email to clarify objectives and any missing data
• We prepare a tailored 30+ page written report setting out your options, worked examples, risks, and recommended next steps

What you receive

• A 30+ page personalised report with numbered recommendations and a clear sequence of actions

⚖️ Important Notice – Scope of Planning Support

This article is for information only. Calculations are illustrative and based on your inputs. Please ask your accountant to verify CGT and your solicitor to confirm legal steps before you proceed with a sale or refinance.

Property118 does not provide formally regulated or insured advice on law, tax, or financial services, including life insurance, mortgages, pensions, or investment products.

Our role is to present researched planning recommendations based on our interpretation of current legislation, HMRC guidance, established case law, and our extensive experience supporting UK landlords.

While our bespoke recommendations are always based on detailed research, we strongly recommend that you share them with appropriately regulated professional advisers, such as your solicitor, accountant, or financial adviser, and ask them to review and confirm the correct legal and tax treatment before proceeding.

Specific regulated responsibilities include:

• Tax calculations and filings – Your accountant
• Stamp Duty Land Tax and equivalents – Your solicitor
• Company structuring – Your accountant
• Legal drafting – Your solicitor or Barrister
• Trust, wills, and succession planning – A STEP-qualified solicitor or trust specialist
• Life cover, pensions, and other financial services – An FCA-regulated financial adviser

Property118 is happy to work with your existing advisers or introduce you to trusted professionals. Our planning is designed to support you in making commercially led decisions that can then be implemented through appropriate regulated channels.