Exiting the UK private rental sector: What individual landlords need to know about tax

As more landlords consider leaving the UK’s private rental sector due to rising costs and regulatory pressures, understanding the tax implications of selling rental property is essential.

But what does this mean from a tax perspective if you are a UK individual operating the business outside of a company?

Capital gains tax (CGT)

If you sell a buy-to-let property, you may owe Capital Gains Tax (CGT) on your profit. CGT is calculated by subtracting your purchase price, legal and estate agent fees, and capital improvements from the sale price.

For 2025/26, CGT on residential property is 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The tax-free allowance (Annual Exempt Amount) is now £3,000 per person, so more landlords may pay CGT. This must also be reported and paid to HMRC within 60 days of completing the sale.

Reliefs are limited: Private Residence Relief only applies if the property was your main home, and Lettings Relief is now rare.

Inheritance tax (IHT)

Changing your property assets into cash will not directly impact your IHT position.  There could however be greater flexibility to mitigate your IHT liabilities longer term through the gift of cash, rather than property.

Stamp duty land tax (SDLT)

While SDLT is usually paid on property purchases, it can also apply when transferring property to a family member if there is an outstanding mortgage. The additional property surcharge, currently at 5%, may still apply in such cases, even if no money changes hands.

Income tax

Rental income must be declared up to the date of sale. This income is added to your total taxable income for the year, which could push you into a higher tax bracket.  It is important to include all allowable expenses to reduce your taxable rental profit.

Making tax digital (MTD)

From April 2026, landlords with income over £50,000 must comply with MTD for Income Tax, requiring digital record-keeping and quarterly submissions.  Exiting the sector now may help eliminate these future administrative burdens.

If you are considering exiting the sector then it is recommended you seek advice ahead of doing so.  Acting early allows you to take advantage of available reliefs, time your sale to minimise liabilities, and explore options like gifting or restructuring ownership.

If you would like any further or personalised advice, please do not hesitate to get in touch with a member of our Real Estate Leadership Team.