A Guide to Capital Gains Tax on Property for Buy-to-let Investors

Table of contents

Key takeaways:

  • Learn more about capital gains tax on property for better investment results.
  • Associate with professionals who can assist you in managing your capital gain tax and ensure you achieve your goals with finesse.

In the UK, house prices are going up. This might make you think about investing in a buy-to-let property.

But with the increase in prices, you’ll be charged more capital gains tax when selling, so do you want to save on the tax bill?

The government charges Capital Gains Tax (CGT) on the difference between a property’s buying and selling prices. 

If you understand the nuances of capital gains tax on property, you can reduce the amount you pay in different circumstances.

Let’s dive deep into the topic.

What Is Tax on Capital Gains for Buy-to-Let Investors?

CGT is paid on the profit you make when selling your buy-to-let property. You can also give away or exchange your property if you are not selling.

Working out the tax can become complex if you have stayed in the property as your main home during your ownership. 

Now that you have a basic understanding of the CGT of buy-to-let property, you might wonder how much CGT you have to pay on a buy-to-let and how much income.

The CGT rate is 18% for individuals with earnings of up to £50,000 in a tax year. But if you earn more than £50,000 in a tax year, the rate can go up to 28% for higher-rate taxpayers.

So, how can you reduce your bill?

You have a yearly allowance like your income tax, and special tax relief can reduce your overall bill. 

Note: You might encounter a worst-case scenario where no tax relief applies. (which is unlikely if you associate with professionals to help you sort things).

For example, if the selling price on the latest UK average house price is £268,000 for a buy-to-let property purchased for £125,000, the gain would be £143,000. You’ll be charged a CGT of £25,740, while a higher-rate taxpayer would face a bill of £57,200.

There are also multiple other ways which can help you reduce your overall tax bill.

5 Tips Which Can Help You Lower the Capital Gains Tax on Property

You might come across multiple ways which can ensure you can control your capital gain taxes on a buy-to-let property, but we have finalised five of the best ways:

  1. Having the asset in your spouse’s name is more beneficial only if they fall in the lower tax bracket.

    CGT is not paid on the transfer of assets between the spouses, so it enables you to save tax by taking advantage of a lower tax bracket.

    Also, if your partner jointly owns the property, you can merge your allowances and raise the limit from  £6,000 to £12,000.
  1. You must ensure you claim relief for all allowable expenses to lower your overall tax bill for buy-to-let property.
  1. If you own property with a limited company, you must pay corporation tax on any CGT at 19% to 25%.

    But from 1 April 2023, the attractiveness of this measure has reduced with the rise in corporate tax rates from 19% to 25%, depending on profits.
  1. Ensure to avail of any private residence or letting relief available to claim private residence relief.

    If your buy-to-let property was your main residence before being sold, you are eligible for the relief.

    Also, you can claim letting relief of up to £40,000, if you let your property at some point of your ownership to the tenant.
  1. Also, you can use business asset rollover relief to defer the payment of any capital gains booked during the property sale until its replacement.

    You must use the sale proceeds to qualify for this relief to buy another business property. 

Using these valuable tips, you can manage your CGT and ensure you maximise your profits to achieve the desired results.

However, ensuring you comply with most of these tips can be hectic, so you require professionals to assist you with the operations.

That’s where you can trust Pluxa Property.

Choose Pluxa Property for Managing Your Capital Gain Taxes

At Pluxa Property, we’re here to help you with your property investments and make sure you pay less in capital gains tax. 

We work in Birmingham and many other places in the UK, such as Coventry, Dudley, Nottingham, Derby, Manchester, York, London, Leeds, Bournemouth, Weymouth, Torbay, Cardiff, and Oldbury.

We offer a lot of different services for investors. Whether buying your first property or adding more to your collection, we can find the best deals. 

We can help you get an excellent rental income and even find properties in other countries if you’re interested.

So, what’s making you wait?

Contact our experts to discuss your requirements.


1. How much capital gain is tax-free on property?

In the UK, each individual has an annual tax-free allowance for capital gains, known as the Annual Exempt Amount. 

For the 2023/2024 tax year, this allowance is £12,300. It means the first £12,300 of your taxable gains in that tax year is tax-free. 

Any gain above this threshold is subject to Capital Gains Tax.

What is the capital gains tax on investors?

The Capital Gains Tax rate depends on their total taxable income and gains for the year. For basic-rate taxpayers (earning up to £50,270 for the 2023/2024 tax year), the CGT rate on property is 18%. 

For higher or additional-rate taxpayers (earning above £50,270), the CGT rate on property is 28%. 

These rates apply specifically to gains from residential property, not their main home, such as buy-to-let investments.


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