Capital Gains Tax (CGT)
Capital gains tax (CGT) is a UK tax on the profit a person makes when they sell or dispose of an asset that has gone up in value. For renting, it mainly affects landlords, not tenants. If a landlord sells a rental property for more than it cost, after certain allowable costs, the gain may be subject to CGT.
The gain is broadly, sale price minus purchase price minus buying/selling costs (such as legal fees and stamp duty) and qualifying capital improvements. For example, an extension, not routine repairs. Each individual has an annual CGT allowance. Gains above that are taxed at rates that currently differ from income tax and vary depending on whether the asset is residential property and whether the person is a basic or higher-rate taxpayer.
Tenants do not pay CGT on the property they rent, and capital gains tax should not appear as a charge or “admin fee” in a tenancy. A landlord’s CGT bill is their own tax obligation, even where Renters' Right Act increase standards or compliance costs.
For renters, CGT mainly matters indirectly. It may influence a landlord’s decision to hold, improve or sell a property, but it does not reduce your day-to-day housing rights or protections. See the terms Stamp Duty Land Tax (SDLT) and Inheritance Tax (IHT). Also see our expenses feature in August.
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