Can I deduct mortgage interest from my buy-to-let gain?

No. Mortgage interest is not an allowable cost for Capital Gains Tax. It relates to the rental business and is dealt with under the income tax rules.

What CGT rate do landlords pay in 2026/27?

Residential property gains are taxed at 18% within your remaining basic rate band and 24% above it.

Do I need to report a buy-to-let sale if no tax is due?

If the gain is covered by the annual exempt amount or losses so that no tax is payable, a 60-day return is not required, though you may still need to report on Self Assessment.

Capital Gains Tax on buy-to-let property

Selling a rental property is one of the most common triggers for a residential CGT bill. Here is exactly how the gain is worked out and taxed for 2026/27.

Updated for the 2026/27 tax year · Reviewed against HMRC guidance

Basic rate

18%

Higher rate

24%

Annual exempt amount

£3,000

How the gain is calculated

Your gain is the sale price less the original purchase price, minus allowable buying costs (Stamp Duty Land Tax, conveyancing, survey), selling costs (estate agent, legal fees, EPC) and capital improvements such as extensions or loft conversions.

Mortgage interest, letting agent fees, repairs and redecoration are revenue costs claimed against rental income — they cannot also reduce your capital gain.

Which rate applies

The gain is added on top of your taxable income for the tax year of completion. Any part falling within your unused basic rate band (£37,700 above the personal allowance) is taxed at 18%; the rest at 24%.

Reliefs available to landlords

If you never lived in the property, Private Residence Relief is not available and lettings relief now applies only where you shared occupation with your tenant. You can still use the £3,000 annual exempt amount and any capital losses brought forward.

£3,000 annual exempt amount per owner
Capital losses from earlier disposals
Transfer of a share to a spouse before sale (no-gain/no-loss) to use both allowances

Reporting

UK residents must report and pay through HMRC's 'Report and pay Capital Gains Tax on UK property' service within 60 days of completion, and include the gain on the Self Assessment return if they file one.

Frequently asked questions

This guide is general information based on the Taxation of Chargeable Gains Act 1992 and HMRC guidance (including HS283). It is not personal tax advice — for complex cases speak to a qualified tax adviser.