Selling a Buy-to-Let Property: Understanding the Tax Implications

Overview

Disposing of a buy-to-let can trigger several UK tax obligations. This article outlines how Capital Gains Tax (CGT) applies, the relevant rates and allowances, and the reporting requirements when selling residential property.

Background Information

Most buy-to-lets are owned personally rather than through a company. Since April 2020, lettings relief has been restricted and Private Residence Relief (PRR) only covers periods of actual occupation plus the final 9 months of ownership. This means many landlords will face a CGT bill on sale.

Capital Gains Tax on Disposal

Under s.18 Taxation of Chargeable Gains Act 1992 (TCGA 1992), the disposal to an unconnected third party is at actual proceeds. Allowable costs include acquisition, SDLT, legal fees, and improvement expenditure.Current (2024/25) CGT rates for residential property:

Item	Total (£)
Annual CGT exemption	3,000
Basic rate band	18%
Higher/additional rate band	24%

Example:

• Purchase price £200,000 + costs £5,000

• Sale price £300,000 – costs £3,000

• Gain £92,000

• After £3,000 annual exemption = £89,000 taxable.

• First £50,270 may be at 18%, balance at 24% depending on income levels.

  
  

60-Day Reporting

Since April 2020, UK residents must report and pay CGT on UK residential property within 60 days of completion. Late filing triggers automatic penalties.

Other Considerations

• Offset capital losses.

• Joint ownership: gains split between owners for allowances and bands.

• Consider timing of sale across tax years.

  
  

For tailored tax advice you can book in a free discovery call with one of our tax team here to see how we can help. https://calendly.com/flowaccandtax/discoverycall