Would you rather someone else handled this? Our landlord and property tax service means rental accounts and reliefs claimed correctly across your portfolio.
This case study is based on genuine client work carried out by our practice. Names, figures and identifying details have been changed to protect confidentiality, and the numbers shown are representative of the situation rather than the exact amounts. Your own position will differ.
The scenario
A landlord sells a rental flat they have owned for twelve years. Bought for £140,000, sold for £260,000. They plan to mention it to their accountant when they do their tax return next January.
That plan is already a problem, and it has nothing to do with the amount of tax.
The 60 day deadline
If you sell UK residential property at a gain, you must report it and pay the capital gains tax within 60 days of completion. Not on your next tax return. Sixty days.
This catches people constantly, because every other part of the tax system trains you to deal with things annually. Miss it and there are penalties and interest, even if you eventually pay the right amount, and even though you had no intention of avoiding anything.
You then report the disposal again on your self assessment return, which feels like duplication but is how it works.
Working out the actual gain
The gain is not simply sale price minus purchase price. What comes off matters, and people habitually forget half of it.
Costs of buying and selling. Stamp duty on purchase, legal fees both ends, survey, estate agent commission. On this example that could easily be £12,000 of the gain gone.
Capital improvements. An extension, a new kitchen where there was none, converting the loft. Not repairs. Replacing a broken boiler is a repair, and it belonged against rental income in the year you spent it. Adding a bathroom is capital and comes off the gain. People routinely claim neither, because it happened years ago and they cannot find the invoice.
The annual exempt amount, now only £3,000, and any capital losses carried forward, if they were claimed within four years of arising.
So £120,000 headline gain, less £12,000 of costs, less £18,000 of improvements, less £3,000, is £87,000 taxable rather than £120,000.
The rate, and what has changed
Rates are 18% for basic rate taxpayers and 24% for higher rate. The old separate residential rate of 28% is gone, aligned away in October 2024. Guides still quoting 28% are out of date.
The gain stacks on top of your income for the year to decide the rate, so a single gain can straddle both bands: part at 18% until your basic rate band is used, the rest at 24%.
What is worth doing before you sell
Find the paperwork first. Purchase completion statement, improvement invoices, agent bills. Doing this after completion, against a 60 day clock, is how deductions get abandoned.
Consider the timing. A sale on 6 April rather than 5 April moves the tax by a full year and gives you a fresh annual exemption.
Consider ownership. If a spouse is a basic rate taxpayer, transferring a share before sale is a no gain no loss transfer and can use their band and their exemption. It must be genuine and it must be before exchange.
Check Private Residence Relief. If you ever lived in it, part of the gain may be relieved, including the final nine months of ownership.
The point of this example
The 60 day clock starts at completion whether or not you have thought about tax, and the deductions that reduce the bill are the ones you can evidence. Both of those arguments are for a conversation before you sell, not after.
If you are thinking about selling a rental, get in touch early.
Selling a rental property?
We calculate the gain, claim every relief and cost, and file the 60 day return and payment on time, so a sale never becomes a penalty.