Can you avoid Capital Gains Tax on buy to let property?

Many landlords want to know if they can avoid capital gains tax on buy to let property when selling a buy to let home. Capital gains tax on buy to let is a tax on any profit made from selling a rental property, and it’s paid on the gain after certain costs and allowances are deducted.

HMRC requires individuals selling a buy to let property to work out the gain, subtract legal and improvement costs, and pay tax on the remaining profit over the annual allowance. While you usually can’t avoid capital gains tax on buy to let entirely, careful planning and knowing the rules around buy to let tax can often help reduce the amount you need to pay.

What is Capital Gains Tax on Buy to Let Property?

Capital gains tax is a tax on the profit you make when selling a buy to let property. You owe tax on the difference between your selling price and the amount you paid for the property, minus allowable expenses such as stamp duty, solicitor fees, and any renovation costs. Selling a buy to let property means this tax applies because it’s not your main home.

How Much Capital Gains Tax Will You Need to Pay?

The amount of capital gains tax on buy to let property depends on your taxable income and the size of your gain from the sale. For the 2025/26 tax year, the first £3,000 of gains are tax free (your annual exemption).

For gains over this, basic rate taxpayers pay 18% and higher rate taxpayers pay 24% on buy to let residential property sales. If your income is near the tax threshold, part of your gain may be taxed at 18% and the rest at 24%. Always deduct allowable costs from your gain before calculating your tax liability.

When Do You Pay Capital Gains Tax?

You need to pay capital gains tax when selling a buy to let property if your total gains in a tax year are above the annual exemption. You must report and pay CGT within 60 days of completion of the sale. Missing the deadline can result in penalties and interest.

How Do You Pay Capital Gains Tax?

Paying capital gains tax is a straightforward online process:

• Set up a CGT account through your Government Gateway login, which is part of HMRC’s online services.
• Report your gain online and pay the tax yourself, or authorise your accountant to do it for you.
• You’ll need your payment reference number, issued by HMRC, once you file your return. Payments can be made by debit or credit card, or directly through your bank.
• Make sure payment is processed before your deadline to avoid late charges.

How to Avoid Capital Gains Tax on Property?

While it is usually not possible to completely avoid capital gains tax on buy to let properties, there are effective ways to reduce the amount you need to pay:

1. Use Your Annual Tax-Free Allowance

Every individual has a capital gains tax allowance (£3,000 for the 2025-26 tax year). Make sure to use this annual exemption fully, and if you have already used it, consider delaying the sale to the next tax year.

2. Consider Joint Ownership with a Spouse

Owning the property jointly with a spouse or civil partner allows you to combine your CGT allowances, effectively doubling the tax-free amount. Transferring ownership to the spouse in a lower tax band can also reduce your tax liability.

3. Deduct Allowable Costs

You can reduce your taxable gain by subtracting allowable costs such as stamp duty paid on purchase, solicitor and estate agent fees related to buying and selling, and the cost of capital improvements like extensions or renovations. Routine maintenance and mortgage interest cannot be deducted.

4. Set Up a Limited Company

Many landlords choose to buy or transfer properties into a limited company. The sale of properties owned by companies is subject to corporation tax, typically lower than individual CGT rates. This strategy can be tax-efficient, especially for higher-rate taxpayers.

5. Check if You Qualify for Private Residence Relief (PRR)

If you lived in the property as your main home at any time, you might be eligible for PRR. This relief exempts part of the gain related to the time you occupied the property plus the last nine months of ownership, reducing your taxable gain.

What Happens When Selling a Buy to Let Property?

Selling a buy to let property triggers the need to report and pay capital gains tax promptly. Keep complete records of your purchase, sale price, and all related costs to ensure you report the correct gain and pay exactly what is owed on the capital gains tax on buy to let.

Professional Support for Buy to Let Tax

If you sell a buy-to-let property and make a profit from the sale, you make a ‘capital gain,’ which may be taxed (CGT). Whilst you may not be able to avoid paying tax, in some cases, you may be able to lower the amount of CGT that you pay.

Here at dns accountants we advise people on paying Capital Gains Tax on the sale of buy to let properties regularly. We have many landlords and property investment companies as clients and have experts to assist and advise you and help you to minimise your CGT bill.

Contact our team for more help and advice on Capital Gains Tax and tax planning.

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About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.