Selling a Rental Property: The 60-Day Rule Landlords Keep Missing

The tax is due within 60 days of completion, on its own return, long before your Self Assessment. Most landlords find that out after the deadline.

Illustration of Capital Gains Tax on selling a UK rental property

The tax on selling a rental property is not usually the shock. The deadline is. Most landlords assume it goes on the next tax return and discover, well after the fact, that it was due within sixty days of completion.

The 60-day rule

Since the rules changed, a disposal of UK residential property at a gain must be reported and paid within 60 days of completion. Not the exchange date — completion.

It uses a separate HMRC service, a Capital Gains Tax on UK property account, which is not part of Self Assessment and which many people have never set up. Penalties and interest run from the 60-day point regardless of whether you knew.

The gain then also goes on your Self Assessment return for the year, with the amount already paid credited. It is reported twice, which is unintuitive but correct.

The rates

Residential property gains are taxed at 18% within your basic rate band and 24% above it, after the £3,000 annual exempt amount.

The trap is that the gain itself counts towards the band calculation. A landlord with £35,000 of income and a £60,000 gain does not pay 18% on the lot — the gain fills the remaining basic rate band and the rest is at 24%.

Since 30 October 2024 these same rates apply to shares and other assets too. There is no longer a lower rate for non-property gains.

What comes off the gain

What does not come off: repairs and maintenance, mortgage interest, and anything already deducted against rental income. The improvement-versus-repair line matters, and it is worth having the invoices to argue it.

If you lived there

Private residence relief exempts the proportion of ownership during which it was genuinely your main home, plus the final nine months. On a property you lived in for four years and let for six, that removes a substantial slice of the gain.

Letting relief still exists but is now narrow, broadly requiring shared occupancy with the tenant. It no longer applies to the ordinary case of moving out and letting the whole property.

Before you complete

The planning has to happen before the sale, not after. Whether to transfer a share to a spouse to use a second annual exemption, whether to complete either side of 5 April, and what the figures actually are, are all decisions with a deadline attached to them.

Our Capital Gains calculator gives you an estimate in a couple of minutes. If a sale is in prospect, that estimate plus a conversation before completion is worth considerably more than the same conversation sixty-one days after.

Getting help with this

AJH Accountants handles property for clients across the UK. We deal with HMRC, tell you what you can claim, and file on time, so nothing rests on you remembering a deadline. See how the service works, ask for a fixed-fee quote, or call the office on 01204 840303.

Originally published at ajhaccountant.co.uk/blog/capital-gains-tax-selling-rental-property.