Selling a Property You Once Let Out: How Capital Gains Tax (CGT) Works 

If you’ve ever lived in a property, rented it out for a few years, and are now planning to sell – you’re in very common (and sometimes confusing) territory. We get asked about this a lot, so here’s a clear breakdown of how Capital Gains Tax (CGT) applies when you sell a property that was once your home but has also been let. 

1. The Basics: What Capital Gains Tax Is

When you sell a property that has increased in value, CGT may be due on the gain – the difference between: 

• what you paid for it, plus certain allowable costs (e.g. legal fees, stamp duty, improvement costs), and 
• what you sell it for. 

It’s the gain, not the sale proceeds, that’s taxable. 

2. Private Residence Relief (PRR) – Your Main Residence Protection

If the property was your main home at any point, you’re entitled to Private Residence Relief (PRR) for: 

• the entire period you lived there as your main residence, plus 
• the final 9 months of ownership (even if you weren’t living there at that time). 

This means that only the rented-out period (excluding the final 9 months) is normally chargeable to CGT. 

For example: 

You owned a property for 10 years. You lived in it for 5 years and rented it for 5. 

The total gain is £100,000. 

PRR covers 5 years of residence + final 9 months ≈ 59% of ownership. 

Roughly £59,000 of the gain would be exempt, and £41,000 potentially taxable (before applying your annual exemption or other deductions). 

3. Annual Exemption and Tax Rates

Every individual has an annual CGT exemption – £3,000 for the 2025/26 tax year. 

After deducting your exemption, the remaining taxable gain is charged at: 

• 18% if you’re a basic-rate taxpayer, or 
• 24% if your total income (including the gain) pushes you into the higher-rate band. 

These are the current rates for residential property (as per Finance Act 2024, Sch. 1). 

4. What You Can Deduct

When working out the gain, you can deduct: 

• Purchase and sale costs – legal fees, agent fees, SDLT, etc. 
• Capital improvements – e.g. extensions, new kitchens, re-roofing (not routine maintenance). 
• Valuation fees – if you had a professional valuation at purchase or sale. 

Keep all records – HMRC can and do ask for evidence years later. 

5. What You Can’t Deduct

Routine repairs, decoration, or general maintenance don’t count. 

Only works that add value or prolong the asset’s life are allowable improvements. 

6. Timing and Reporting: The 60-Day Rule

Once you sell a property that’s subject to CGT, you must file a UK Property CGT Return and pay the tax within 60 days of completion (not exchange). 

That’s required under Schedule 2 of the Finance Act 2019. 

Your accountant can prepare and file this return on your behalf – at CCM, our current fee is £295 + VAT per person. 

7. Practical Tips Before You Sell

Keep detailed records – purchase documents, legal statements, improvement invoices, and proof of when you lived there (utility bills, council tax, etc.). 

Get an up-to-date valuation if the market value is uncertain – this protects you from HMRC disputes. 

Plan timing carefully – a sale just before 5 April can affect which tax year’s allowance and income rates apply. 

Check ownership structure – if the property is jointly owned, the gain is split, and each owner gets their own exemption. 

8. Common Misunderstandings

• “It was my home once, so there’s no tax.”
  Not always. Only the period it was your main residence (plus 9 months) is exempt. 
• “I don’t need to report it if no tax is due.”
  You still need to file a return within 60 days, even if the gain is fully covered by PRR. 
• “I can deduct every cost I’ve ever spent on it.”
  Only capital improvements and transactional costs qualify – not general upkeep. 

9. When to Get Advice

Before selling, it’s wise to get a quick CGT estimate and relief review – especially if: 

• you’ve owned multiple properties, 
• you’ve transferred ownership within the family, or 
• the property value has risen significantly. 

A short pre-sale review can save unexpected tax and ensure your return is filed correctly. 

10. Key Takeaway

If you’ve lived in the property, rented it out, and are now planning to sell: 

• PRR will cover your residence periods + final 9 months. 
• Only the let period is normally taxable. 
• Use your £3,000 annual exemption and keep full records. 
• Report and pay CGT within 60 days of completion. 

Handled properly, it’s straightforward – but the details matter. 

Need Help Calculating or Filing Your CGT? 

At CCM | Carter Collins & Myer, we prepare property CGT returns for landlords, homeowners, and investors across Greater Manchester and beyond. 

If you’re planning to sell in the next year, we can estimate your gain, confirm reliefs, and handle the return so there are no surprises. 

Contact us at www.uk-ccm.com or call 01706 225 617 to book a short CGT consultation before you sell.