Thinking of Selling Your Cheshunt Rental? Here's What Tax You'll Pay

Thinking of Selling Your Buy-to-Let? Here’s What Every Landlord Should Know About Capital Gains Tax

If you’re a landlord considering selling your rental property, it’s crucial to understand the tax implications involved. Capital Gains Tax (CGT) can come as a shock to many, and failing to plan ahead could lead to a sizeable, unexpected bill.

At Woodhouse Property Consultants, we help landlords across Cheshunt navigate the sale of buy-to-lets confidently and profitably. Below, we explain how CGT works, how much you could owe, and what you can do to potentially reduce your liability.

What is Capital Gains Tax?

Capital Gains Tax is a tax charged on the gain (or profit) you make when you sell certain assets, including investment properties. It applies when you sell a buy-to-let property, but not when you sell your main home.

Importantly, CGT is not charged on the full sale price—only on the profit made since purchasing the property.

Example:
If you bought your rental for £150,000 and sold it for £275,000, the gain would be £125,000. That’s the figure HMRC is interested in.

Over time, gains can accumulate significantly. According to the UK House Price Index, average property prices in England have nearly doubled over the last 20 years. So even if you weren’t intending to make a large profit, market growth alone may have created one.

Note: CGT does not apply if the property is owned through a limited company. In that case, any profits are subject to Corporation Tax instead.

How Much Capital Gains Tax Will You Pay?

CGT is calculated based on your income tax band, which is determined by adding the gain to your other income for the tax year.

The current CGT rates for residential property are:

• 18% for basic rate taxpayers

• 24% for higher and additional rate taxpayers

If your capital gain pushes you into a higher tax band, you may end up paying both 18% on part of the gain and 24% on the rest. This is why it’s important to understand your total income position when calculating potential CGT liability.

Scotland: While income tax bands differ in Scotland, CGT rates remain consistent across the UK.

Keep in mind:

• Tax rates and thresholds may change following the Chancellor’s Budget or other government updates. Always seek up-to-date professional advice.

What Allowances and Deductions Can Reduce Your CGT?

The good news is there are several ways landlords can reduce the amount of Capital Gains Tax owed:

1. Annual CGT Allowance

Every individual has an annual CGT allowance. For the 2024/25 tax year, this is £3,000 per person. If a property is jointly owned, you and your partner can combine your allowances to £6,000.

2. Deductible Costs

You can deduct specific costs from your gain before CGT is calculated. These include:

• Purchase-related costs:

  • Stamp Duty

  • Solicitor/conveyancing fees

  • Survey fees

  • Certain finance arrangement fees

• Sale-related costs:

  • Estate agent fees

  • Legal fees for the sale

• Capital improvements:

  • Extensions, conversions, or structural work that adds value

Important exclusions:

• You cannot deduct routine maintenance or repair costs (such as repainting, new carpets, or boiler servicing).

• Mortgage interest is not deductible.

3. Private Residence Relief (PRR)

If the property was once your main residence, you may be eligible to claim PRR for the period you lived there, as well as the final nine months of ownership. Conditions apply, especially if the property was also rented out.

4. Lettings Relief

In some cases, landlords who lived in the property and then let it out may qualify for lettings relief—although this has been scaled back significantly in recent years.

5. Offsetting Losses

You may offset capital gains with capital losses from other assets sold in the same tax year. You can also carry forward unused losses from previous years, provided they’ve been reported to HMRC.

How and When Do You Pay CGT?

You will not receive an automatic bill from HMRC. You are legally responsible for:

• Reporting your gain

• Calculating the tax due

• Paying the tax within 60 days of completing the sale

All of this must be done using HMRC’s online service via the Gov.uk website.

Failure to comply within the 60-day window can lead to late penalties and interest, even if the mistake was unintentional.

Why It's Crucial to Get Professional Advice

Selling a rental property is a major financial decision. Not only could you lose regular rental income, but you might also face a large tax bill—especially if your property has risen significantly in value.

Capital Gains Tax is a complex area, and the rules frequently change. Professional tax planning is highly recommended to:

• Minimise your liability legally

• Avoid penalties

• Factor CGT into your overall financial strategy

Speak to an accountant or independent financial adviser who can provide tailored advice based on your income, property history, and personal goals.

How Woodhouse Property Consultants Can Help

While we cannot offer financial advice, we can help with every other part of the sales journey—from valuation through to completion.

As Cheshunt’s trusted property experts since 1996, we know the local market inside and out. Whether you’re selling a flat near Brookfield Farm or a family home by Theobalds Grove, we’ll help you achieve the best possible result.

Visit www.woodhouseproperty.co.uk or call us on 01992 637777 to arrange your free, no-obligation property valuation today.

Final Word

Don’t get caught off guard by Capital Gains Tax. With the right preparation—and the right team by your side—you can sell your rental property smoothly and confidently.

If you found this guide useful, feel free to share it with another landlord who might benefit.

This guide is for general information only and does not constitute tax or financial advice. Please consult a qualified professional before making any decisions.