When you’re renting out a single flat or house, you may not even think of yourself as a ‘landlord’ in the traditional sense. After all, you won’t necessarily be making a living purely from property. But one thing’s for sure: you’re still likely to be liable for Capital Gains Tax (CGT) when you sell up.
If you’re not currently employing an accountant, you may want to consider reaching out for a professional’s help, although here is a checklist in the meantime to help you avoid any nasty surprises.
Keep the property’s original cost recordsRemember that CGT is charged on the gain you’ve made. So make sure you have a good grasp of all the costs that were involved when you purchased the property originally. This includes the purchase price (fairly obviously!), but also:
Make sure to keep the original completion statement and purchase documents.
Keep a separate record of capital improvementsThis is particularly important if you’ve owned the property for many years.
Keep invoices for:
It’s worth pointing out, however, that you can’t treat every repair as a CGT deduction. If you’ve undertaken normal maintenance and decorating, this won’t count as improvement expenditure.
Keep records of selling costsWhen you do eventually sell, keep a careful record of:
Generally these will allow you to reduce the taxable gain and therefore your ultimate bill.
This isn’t really rocket science.
It’s essentially your sales proceeds minus your original purchase cost, as well as the qualifying acquisition costs, the qualifying improvement expenditure and qualifying selling costs.
There are then some other things to consider, which is when having an accountant available can often be handy. You need to think about:
This can make a very significant difference. If the property was once genuinely your only or main residence, you may qualify for Private Residence Relief for the period in question. If you meet certain conditions, the final nine months of your ownership of the property can also qualify.
This means you need to have a record of:
If you simply bought a property as a buy-to-let and have never actually lived there, Lettings Relief isn’t generally available. Back in 2020, the rules changed, as the previous relief appeared too generous – benefiting people who had long since moved out, but retained their former home as an investment.
Although things are more restricted now, different rules may apply if you were actually living at the property at the same time as a tenant.
Keep track of your ownership percentageIf you own the flat or house jointly, make sure you establish each owner’s legal/beneficial share, keep evidence of the ownership split and calculate each person’s gain separately. As far as HMRC is concerned, jointly owned property is calculated according to the share owned.
Consider your spouse or civil partnerIf you’re married or in a civil partnership, don’t overlook the possibility of ownership planning. For CGT purposes, transfers between spouses and civil partners are typically made on a no-gain/no-loss basis. This can potentially allow the use of two people’s CGT allowances and tax bands, when the property is ultimately sold. But this is an area where it’s a really good idea to take some professional advice, as you also need to take into account issues such as income tax, mortgages and beneficial ownership.
Check whether you have capital lossesAs you’d expect, allowable capital losses can be offset against gains. Not only that, but unused losses can generally be carried forward. So look to see if you:
It’s important to note, however, that property rental losses are not the same thing as capital losses!
Don’t forget the £3,000 annual exemptionThis is the exemption figure for 2026/7, representing the amount on which no tax is due. So if your net chargeable gain is, say, £50,000 after allowable costs and reliefs, the taxable gain is only £47,000. While this may not make a huge amount of difference to your ultimate bill, you won’t want to look a gift horse in the mouth.
Check your income tax position in the year of saleIndividual CGT rates for 2026/7 are 18% to the extent the gain falls within your basic-rate income tax band, and 24% above that band. Your taxable income for the year will therefore affect the amount you have to pay.
Watch the date of disposalThe timing matters. If you sell, don’t leave the CGT calculation until the normal self-assessment deadline. You actually have to report the disposal and pay the CGT within 60 days.
You can find out more detail by visiting https://www.gov.uk/tax-sell-property, but if you feel you would benefit from chatting to one of our advisers, please don’t hesitate to email enquiries@pagekirk.co.uk or ring 0115 955 5500.
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