Last updated: 14 October 2026
Can you make a buy-to-let property exempt from capital gains tax?
Not entirely, unless it has been your main home. A buy-to-let property is subject to CGT when you sell it, on the increase in value since you bought it. You can reduce the gain with costs, the £3,000 annual exempt amount and, if you lived there at some point, private residence relief. Transferring a share to a spouse or civil partner can also use their allowance and lower tax band.
2026/27 CGT on residential property
- Annual exempt amount: £3,000
- Rate: 18% on gains within your unused basic-rate band, 24% above
- Report and pay within 60 days of completion
Legal ways to reduce the gain
1. Deduct all allowable costs
Purchase price, stamp duty, legal fees, estate agent fees on sale and capital improvements such as extensions all reduce the gain. Repairs claimed against rental income don’t.
2. Private residence relief (PRR)
If you lived in the property as your main home at any point, that period is exempt, plus the last 9 months of ownership.
3. Lettings relief
This only applies now if you shared the home with your tenant while living there, up to £40,000.
4. Spouse transfers
Transfers between spouses or civil partners living together are free of CGT. Moving a share before a sale can use two annual exemptions and two basic-rate bands. The transfer must be genuine. Check the Form 17 position for rental income.
5. Time the sale
Selling in a year when your other income is low means more of the gain falls in the 18% band.
6. Use losses
Capital losses on other assets can be set against the gain.
Example
A landlord bought a flat for £200,000 in 2014 (plus £8,000 costs), lived in it for the first 2 years, then let it, and sold in 2026 for £350,000. The gain is £142,000. About 2.75 out of 12 years (2 years plus the final 9 months) qualifies for PRR, so £32,542 is exempt. After the £3,000 exemption, about £106,458 is taxable. At 24%, that is about £25,550.
Incorporation
Moving property into a company is usually a disposal at market value. Incorporation relief may defer the gain if the letting is a genuine business. It rarely works for a single property.
Mistakes when selling a rental property
Landlords often claim mortgage interest, letting fees or repairs against the gain, which aren’t allowed. Only purchase and sale costs and capital improvements count. Report the gain within 60 days of completion. If you lived in the property at some point, private residence relief may cover part of the gain, so keep proof of the dates you lived there. Keep tenancy agreements.
Frequently asked questions
Can I nominate a buy-to-let as my main home?
Only if you actually live there. An election applies only where you have two residences you live in.
Is CGT due if I gift the property?
Yes, on the market value. See CGT on a property gift.
What if the property is inherited later?
There is no CGT on death, but IHT may apply.
Can I deduct mortgage interest from the gain?
No.
Related: landlord tax returns.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with capital gains tax on rental property. See our landlord accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
