Should you sell your rental property now or wait? From a Capital Gains Tax point of view, there is no rate change forcing a decision this year: gains are taxed at 18% and 24% in 2026/27, the same as last year, after a £3,000 annual exempt amount. The best time to sell your rental property depends far more on your income in the year of sale, your plans for the money and the wider changes landlords are facing.
Those wider changes are real. Income tax on property income rises by two percentage points from April 2027, the Renters’ Rights Act reforms took effect on 1 May 2026, and mortgage costs remain higher than many landlords planned for. For the official CGT rules, see GOV.UK’s Capital Gains Tax rates.
This guide sets out the tax factors that should shape your timing, with a worked example showing how waiting a single tax year can change the bill.
The Capital Gains Tax Position in 2026/27
If you sell your rental property in the 2026/27 tax year, the rules are:
- Rates: 18% on gains within your unused basic rate band and 24% above it.
- Annual exempt amount: £3,000 per person, which cannot be carried forward.
- Reporting: UK residential property gains must be reported and paid within 60 days of completion.
- Allowable costs: purchase and selling costs and capital improvements reduce the gain. Mortgage interest does not.
No change to CGT rates on residential property has been announced for 2027/28, but tax policy can change at any Budget. Waiting in the hope of lower rates is a gamble, not a plan. Read our full guide to Capital Gains Tax rates for 2026/27.
Why Landlords Are Reviewing Whether to Sell
Several changes are pushing landlords to decide whether to sell your rental property now or keep it for the long term:
- Higher tax on rental income from April 2027: property income will be taxed at 22%, 42% and 47% in England, Wales and Northern Ireland, two points above the normal rates.
- Renters’ Rights Act: from 1 May 2026, section 21 no-fault evictions ended, most tenancies became periodic and rent can usually only be increased once a year.
- Mortgage interest restriction: individual landlords still only receive a basic rate tax credit for finance costs, so higher rate landlords with mortgages pay tax on more than their real profit.
- Frozen allowances: the annual exempt amount stays at £3,000, far below the £12,300 available in 2022/23.
None of these change the CGT you pay on a sale, but they change how attractive it is to keep holding the property.
How Your Income in the Year of Sale Changes the Tax
The single biggest timing factor is your income in the tax year you sell. Your gain sits on top of your income, so the more basic rate band you have spare, the more of the gain is taxed at 18% instead of 24%.
If you are about to retire, take a career break, reduce your hours or stop receiving a large bonus, it can pay to sell your rental property in that lower-income year. For CGT, the disposal date is the date contracts are exchanged, not completion, so exchanging just after 5 April moves the gain into the next tax year.
Worked Example: Selling Now Versus Next Tax Year
Peter earns £60,000 a year but retires in March 2027. From April 2027 his income will be around £20,000 from pensions and rent. His rental property will produce a gain of £70,000 after allowable costs.
If Peter sells in 2026/27
He is a higher rate taxpayer with no unused basic rate band.
£70,000 − £3,000 = £67,000 × 24% = £16,080.
If Peter exchanges contracts after 5 April 2027
His taxable income is £20,000 − £12,570 = £7,430, leaving £30,270 of basic rate band.
£30,270 × 18% = £5,448.60
£36,730 × 24% = £8,815.20
Total: £14,263.80
Waiting saves Peter £1,816.20, assuming rates and allowances stay the same. He must weigh that against a further year of rental income taxed at the higher 2027 property rates and any change in the property’s value. See more capital gains tax worked examples.
Timing Strategies When You Sell Your Rental Property
| Strategy | How it reduces CGT | Watch out for |
|---|---|---|
| Sell in a low-income year | More of the gain taxed at 18% | Exchange date decides the tax year |
| Spread several sales over two tax years | Uses two annual exemptions and two basic rate bands | Market risk on the second property |
| Transfer a share to a spouse first | Uses their exemption and basic rate band | Must be a genuine gift before exchange |
| Make a pension contribution | Extends your basic rate band | Annual allowance limits |
| Sell in the same year as a loss | Capital losses reduce the gain | Losses must be reported to HMRC |
Our guides on sharing CGT allowances between spouses and using capital losses explain these steps in detail.
Holding Until Death: The Inheritance Tax Trade-Off
Some landlords decide never to sell, because assets are revalued to market value on death and the gain disappears for CGT purposes. The trade-off is Inheritance Tax at 40% on the value of the estate above the available nil-rate bands. The residence nil-rate band only applies to a home passed to direct descendants, not usually to a buy-to-let.
For a landlord with a large estate, paying 24% CGT during life can be cheaper than 40% Inheritance Tax on the full value later. The right answer depends on your estate, your health and your family’s plans. See GOV.UK’s Inheritance Tax guidance and our article on Inheritance Tax property changes.
Reporting the Sale on Time
Whenever you sell, the 60-day reporting deadline runs from completion. Make sure your calculation is ready before you complete, so you can pay the tax on time. HMRC explains the process in its guidance on reporting and paying Capital Gains Tax. Our guide on how CGT is calculated on a rental property shows every step.
Getting Specialist Help Before You Decide
Deciding whether to sell your rental property now or wait is a financial decision as much as a tax one. Projected income, mortgage costs, the property market, Inheritance Tax and your retirement plans all play a part.
Our ACCA-qualified team at Capital Gains Tax Experts models the tax under each option, shows you the after-tax proceeds side by side, and handles your 60-day return when you sell. For the main planning options, read our guide to selling a buy-to-let property.
Frequently Asked Questions
How can I avoid capital gains tax when selling a rented property?
You cannot avoid CGT on a genuine gain, but you can reduce it. Sell in a low-income tax year, transfer a share to a lower-earning spouse before exchange, make a pension contribution, use capital losses, claim every allowable cost, and claim Private Residence Relief for any period it was your main home.
Why are landlords selling up in 2026?
Many landlords are selling because of higher mortgage costs, the Renters’ Rights Act reforms that took effect on 1 May 2026, and the planned rise in income tax on property income to 22%, 42% and 47% from April 2027. Lower net yields make holding less attractive for some investors.
Is capital gains tax changing in April 2026?
The main rates of 18% and 24% and the £3,000 annual exempt amount are unchanged for 2026/27. The change from 6 April 2026 is that Business Asset Disposal Relief and Investors’ Relief rise to 18%, which does not affect ordinary rental property sales.
What is the 36-month rule for capital gains tax in the UK?
The 36-month rule was the old final period of ownership exempt under Private Residence Relief. It is now nine months for most people, although 36 months still applies if you are disabled or moving into long-term care. It only helps if the rental property was once your main home.
Is it better to sell a rental property before or after 5 April?
It depends on your income in each tax year. If your income will be lower next year, exchanging contracts after 5 April can move more of the gain into the 18% band. Selling after 5 April also gives you a new £3,000 annual exemption.
Conclusion
There is no CGT cliff edge forcing landlords to sell this year, but rising tax on rental income, the Renters’ Rights Act and higher finance costs have changed the economics of holding. The best time to sell your rental property is usually the tax year in which your other income is lowest and your plans for the proceeds are clear.
Model the tax under each option before you exchange contracts, because most planning steps are not available afterwards.
For a personal comparison of selling now versus later, contact our team at Capital Gains Tax Experts. Call us on +44 (0)1204 859315 or try our free CGT calculator to get an instant estimate.
