How do you calculate capital gains tax on a rental property?

In the UK, the same personal Capital Gains Tax rules apply across England, Wales, Scotland and Northern Ireland, but this article uses SDLT for England and Northern Ireland, LBTT for Scotland and LTT for Wales where purchase taxes matter. It covers rental property owned personally; a limited company usually pays Corporation Tax on a property gain, because GOV.UK says: “Your limited company usually pays Corporation Tax on the profit (‘chargeable gain’) from selling or disposing of an asset.”

How do you calculate the capital gain on a rental property?

You calculate the capital gain on a personally owned rental property by taking the sale proceeds, deducting the original purchase price and allowable buying, selling and improvement costs, then applying any reliefs, the £3,000 annual exempt amount and the CGT rate that matches your remaining basic-rate band. GOV.UK’s starting point is: “Your gain is usually the difference between what you paid for your property and the amount you got when you sold (or ‘disposed of’) it.” A simple capital gains tax on property calculator example is: sell for £400,000, buy for £250,000, deduct £8,000 selling costs and £20,000 qualifying improvements, leaving a £122,000 gain before reliefs and allowance. Abodient can hold each property's purchase price and later improvement costs against the record, which matters because those are exactly the two figures this calculation starts from. For 2026/27, GOV.UK’s rate example uses the basic-rate band as £37,700, not £50,270: “Because the combined amount of £29,600 is less than £37,700 (the basic rate band for the 2026 to 2027 tax year), you pay Capital Gains Tax at 18%.” As of August 2026, rental-property gains are taxed at 18% or 24%, so how much capital gains tax you pay depends on taxable income, reliefs and ownership shares.

What costs can you deduct from the gain?

You can deduct acquisition costs, disposal costs and qualifying capital improvements from a rental-property gain, but you cannot deduct repairs already allowable against rental income or ordinary mortgage interest. GOV.UK gives the broad rule: “You can deduct costs of buying, selling or improving your property from your gain.” The statutory incidental-cost list includes professional fees, commission, legal costs and transfer costs “including stamp duty or stamp duty land tax”; in practice that means SDLT in England and Northern Ireland, LBTT in Scotland and LTT in Wales. Enhancement spend only counts if it is still reflected in the property at sale, because section 38 covers expenditure “for the purpose of enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal.” Renovation costs can be offset against capital gains tax only when they are capital improvements, not repairs: decorating and like-for-like double glazing are normally repair-side expenses, and HMRC says “A repair is normally a revenue expense that can be deducted in computing property business profits.” Section 39 prevents double counting by excluding expenditure already allowable against income.

How much is the capital gains tax allowance on property?

There is no property-specific CGT allowance — everyone gets one £3,000 Annual Exempt Amount a year against total gains across everything sold, not a property-only band. GOV.UK states the rule as an overall allowance: “You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).” For 2026/27, GOV.UK’s worked example says: “For the 2026 to 2027 tax year the allowance is £3,000, which leaves £9,600 to pay tax on.” That means a landlord selling a rented property does not get a separate buy-to-let or second-property CGT allowance; the £3,000 is shared across chargeable gains in that tax year, after losses and reliefs are applied in the correct order. Unused allowance is lost rather than saved, because HMRC says: “If it is not used it cannot be carried forward or back and added to the AEA for subsequent or preceding tax years.” Companies do not get this allowance, as HMRC says there is “no similar exemption” for company chargeable gains.

How much private residence relief do you get on a property you once lived in?

Private Residence Relief on a property you once lived in is normally the gain multiplied by your qualifying occupation period, including the final 9 months if it was ever your only or main home, divided by the total ownership period. HMRC’s helpsheet gives the formula: “When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 9 or 36 months where appropriate) divided by the period of ownership.” The current final-period rule is 9 months, not the old 18 months: HMRC says, “The current final period exemption is 9 months.” A Private Residence Relief calculator should not revalue the property on the day you moved out, because HMRC says: “You do not introduce valuations of the property at the dates of changes of use.” Lettings relief is now narrow: it does not apply where the whole home was let, because HMRC says “Letting relief does not apply where the whole of the dwelling house was let for a time.” Where lettings relief is available, the statutory cap is the lower of PRR already given and £40,000, not a three-part cap.

How do you work out the gain on a jointly owned property?

You work out CGT on a jointly owned rental property by calculating the whole property gain, then taxing each owner on their beneficial share of that gain, not automatically using the spouses’ 50/50 income-tax rule. GOV.UK states: “If you dispose of an asset you jointly own with someone else, you have to pay Capital Gains Tax on your share of the gain.” HMRC’s UK property return manual says: “Where the property is jointly owned, the figures should be apportioned between the owners and only their individual share reported.” Married couples and civil partners often confuse this with the income-tax rule, under which “The individuals are treated for income tax purposes as beneficially entitled to the income in equal shares”; that sentence is expressly for income tax, while CGT follows beneficial ownership as a question of fact. If there is no evidence of different spouse or civil-partner shares, HMRC assesses joint legal owners half each. Scotland needs special care because beneficial ownership does not work in the same way: LITRG says that if you are not a legal owner in Scotland, “you cannot have a beneficial interest under Scottish law.” Abodient can record ownership shares between joint owners, which matters because a CGT on jointly owned property calculation starts with the share each person actually owns.

Last reviewed August 2026.

Sources

• GOV.UK, Tax when your company sells assets — “Your limited company usually pays Corporation Tax on the profit (‘chargeable gain’) from selling or disposing of an asset.” Source
• GOV.UK, Work out your gain — “Your gain is usually the difference between what you paid for your property and the amount you got when you sold (or ‘disposed of’) it.” Source
• GOV.UK, Capital Gains Tax rates — “Because the combined amount of £29,600 is less than £37,700 (the basic rate band for the 2026 to 2027 tax year), you pay Capital Gains Tax at 18%.” Source
• GOV.UK, Work out your gain — “You can deduct costs of buying, selling or improving your property from your gain.” Source
• Taxation of Chargeable Gains Act 1992, section 38 — “(b)the amount of any expenditure wholly and exclusively incurred on the asset by him or on his behalf for the purpose of enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal, and any expenditure wholly and exclusively incurred by him in establishing, preserving or defending his title to, or to a right over, the asset,” Source
• HMRC Property Income Manual PIM2025 — “A repair is normally a revenue expense that can be deducted in computing property business profits.” Source
• Taxation of Chargeable Gains Act 1992, section 39 — “There shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure allowable as a deduction in computing the profits or losses of a trade, profession or vocation for the purposes of income tax or allowable as a deduction in computing any other income or profits or gains or losses for the purposes of the Income Tax Acts and any expenditure which, although not so allowable as a deduction in computing any losses, would be so allowable but for an insufficiency of income or profits or gains; and this subsection applies irrespective of whether effect is or would be given to the deduction in computing the amount of tax chargeable or by discharge or repayment of tax or in any other way.” Source
• GOV.UK, Capital Gains Tax allowances — “You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).” Source
• GOV.UK, Capital Gains Tax rates — “For the 2026 to 2027 tax year the allowance is £3,000, which leaves £9,600 to pay tax on.” Source
• HMRC Capital Gains Manual CG18000 — “If it is not used it cannot be carried forward or back and added to the AEA for subsequent or preceding tax years.” Source
• HMRC Capital Gains Manual CG18000 — “There is no similar exemption for chargeable gains arising to companies, on which they pay corporation tax.” Source
• HMRC helpsheet HS283, Private Residence Relief 2026 — “When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 9 or 36 months where appropriate) divided by the period of ownership (both periods starting at 31 March 1982 if the house was owned before that date).” Source
• HMRC Capital Gains Manual CG64985 — “The current final period exemption is 9 months.” Source
• HMRC helpsheet HS283, Private Residence Relief 2026 — “You do not introduce valuations of the property at the dates of changes of use.” Source
• HMRC helpsheet HS283, Private Residence Relief 2026 — “Letting relief does not apply where the whole of the dwelling house was let for a time.” Source
• GOV.UK, Capital Gains Tax: what you pay it on — “If you dispose of an asset you jointly own with someone else, you have to pay Capital Gains Tax on your share of the gain.” Source
• HMRC Capital Gains Manual CG-APP18-240 — “Where the property is jointly owned, the figures should be apportioned between the owners and only their individual share reported.” Source
• Income Tax Act 2007, section 836 — “The individuals are treated for income tax purposes as beneficially entitled to the income in equal shares.” Source
• LITRG, Joint income from property — “Note that the concept of beneficial ownership does not apply in the same way to property in Scotland, where the law is slightly different to that in England and Wales or Northern Ireland – if you are not a legal owner, then you cannot have a beneficial interest under Scottish law, but rather a 'right’ to the underlying property.” Source