UK Capital Gains & Rental Property Tax Guide (2025/2026)
Comprehensive guide to UK Capital Gains Tax, buy-to-let rental income, Section 24 mortgage relief rules, Airbnb taxes, and HMRC Let Property Campaign.
Investing in real estate, shares, or digital assets in the UK brings specific tax obligations under Capital Gains Tax (CGT) and Income Tax on Rental Property. Whether you sell a second home, manage a buy-to-let portfolio, host guests on Airbnb, or dispose of company stock, understanding HMRC rules will prevent costly penalties.
In this guide, we explore current UK Capital Gains Tax rates and allowances (2025/2026), how Section 24 mortgage interest relief impacts landlords, allowable property expenses, the HMRC Let Property Campaign, and 60-day property disposal reporting.
1. UK Capital Gains Tax (CGT) Rates & Allowances
Capital Gains Tax is charged on the profit (gain) made when you sell, gift, or exchange an asset that has increased in value.
Annual Exempt Amount (CGT Allowance)
For the 2025/2026 tax year, every individual receives an Annual Exempt Amount of £3,000. Tax is payable only on capital gains exceeding this threshold.
CGT Rates Breakdown:
| Asset Category | Basic Rate Taxpayer | Higher & Additional Rate Taxpayer |
|---|---|---|
| Shares, Crypto, Artwork & Business Assets | 10% | 20% |
| Residential Real Estate (Second Homes, Buy-to-Let) | 18% | 24% |
[!NOTE] Primary Residence Relief (PRR): Selling your main home (primary residence) is generally 100% exempt from Capital Gains Tax under Private Residence Relief, provided it was used exclusively as your main home throughout ownership.
Calculate net gains alongside total income using our UK Income Tax Calculator.
2. Rental Income Tax & Buy-to-Let Landlord Rules
If you earn rental income from UK property, profits are added to your overall taxable income and taxed at your marginal Income Tax rate (20%, 40%, or 45%).
Section 24 Mortgage Interest Restriction
Under Section 24, private individual landlords can no longer deduct mortgage interest or finance costs from gross rental income prior to calculating tax.
Instead, landlords receive a 20% tax credit on finance costs.
Example: Landlord with £20,000 Rental Income and £10,000 Mortgage Interest (40% Higher Rate Taxpayer)
Gross Taxable Rental Income: £20,000
Income Tax at 40%: £8,000
Less 20% Section 24 Tax Credit (20% of £10,000): -£2,000
Net Tax Due: £6,000 (Effective tax rate of 60% on net profits!)Property Allowance (£1,000)
Small landlords or room hosts can claim a flat £1,000 Property Allowance tax-free without submitting detailed receipts. If expenses exceed £1,000, actual itemized expenses should be deducted instead.
Allowable Rental Expenses:
- Property maintenance and repairs (excluding capital improvements).
- Letting agent fees, legal fees, and accountant fees.
- Buildings and contents insurance.
- Utility bills and Council Tax paid by the landlord.
3. HMRC 60-Day Capital Gains Tax Reporting for Property
When selling UK residential property resulting in CGT liability, UK residents and non-residents must report the disposal and pay estimated CGT to HMRC within 60 days of property completion using the online UK Property Tax Account.
Failure to report within 60 days results in immediate £100 late filing penalties plus accruing interest.
4. HMRC Let Property Campaign & Undeclared Rental Income
HMRC uses sophisticated data-matching software (Connect) to cross-reference Land Registry records, Airbnb booking engines, mortgage data, and bank statements.
If you have undeclared rental income from previous years, HMRC’s Let Property Campaign allows residential landlords to make a voluntary disclosure. Voluntary disclosures qualify for significantly reduced penalties compared to HMRC-initiated tax investigations.
Frequently Asked Questions (FAQs)
1. What is the Capital Gains Tax allowance in the UK?
The Capital Gains Tax Annual Exempt Amount is £3,000 for the 2025/2026 tax year. Gains up to £3,000 per person are tax-free.
2. How much tax do I pay on selling a buy-to-let property?
After deducting your £3,000 exemption and purchase costs/capital improvements, gains on residential property are taxed at 18% (for Basic Rate taxpayers) or 24% (for Higher/Additional Rate taxpayers).
3. What is Section 24 for UK landlords?
Section 24 replaces direct mortgage interest tax deductions with a 20% tax credit. Higher rate landlords pay 40% Income Tax on gross rental profits before mortgage costs, then subtract a 20% credit on finance costs.
4. Do I pay tax on Airbnb income in the UK?
Yes. Airbnb income is treated as property or trading income. Hosts can utilize the £1,000 Property Allowance or Rent-a-Room Relief (up to £7,500 tax-free if renting a furnished room in your main home).
5. How long do I have to report CGT on a house sale to HMRC?
You must report and pay Capital Gains Tax on UK residential property sales within 60 calendar days of legal completion.
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