I hope this is the right board for this. My husband and I have been going back and forth on this for months now and I think we need some outside perspective, so I am laying everything out.
We own a two bedroom terraced house in Kent which we have let for the past twelve years. It was originally my late mother’s home and we kept it on as a rental rather than selling at the time because the market was flat and the rental income was useful. The property is mortgage free. Our tenant has been there for six years and is no trouble at all. Current rent is £875 per month.
The problem is that costs have been creeping up significantly. We had to replace the boiler last year (£3,200), the roof needs attention in the next two to three years (we have had two quotes, both around £8,000), and the letting agent’s fees went up again in October. On top of that, the 2% landlord income tax surcharge from April 2027 will eat further into what is already a modest return.
With the base rate now at 3.75% and mortgage rates coming down, I had hoped the market might pick up a bit in the spring, which would make selling easier. The December asking price data is not hugely encouraging but I understand that is seasonal. The property was valued at approximately £235,000 in September.
My specific questions are these. First, given that the property was inherited and we have owned it for twelve years, is there any advantage in waiting until the new tax year in April to sell, or does it not matter from a CGT perspective since we have not lived in it ourselves? Second, does the Section 21 abolition in May affect our position at all, given that our tenant is on a periodic tenancy? Third, am I right in thinking that a mortgage free BTL with a good tenant should be attractive to an investor buyer, or has the Budget put people off?
I would be very grateful for any thoughts. Thank you.
On the CGT question, the base cost for an inherited property is the probate value at the date of death, not the original purchase price. If the property was valued at probate twelve years ago and is now worth £235,000, the gain is the difference between those two figures less allowable costs. The annual exempt amount for 2025/26 is £3,000 per person, so £6,000 between you. Whether it is worth waiting until April depends on whether you have already used this year’s exemption. If you have not, selling before 5 April uses 2024/25 allowances and you would then have 2025/26 available for any other disposals. If you have no other gains planned, the timing makes little practical difference.
On Section 21, the abolition applies to new notices served after 1 May 2026. It does not retrospectively affect your ability to sell with a tenant in situ. A buyer would simply take on the periodic tenancy. The tenant’s security of tenure changes under the new regime but that is the buyer’s concern, not yours at point of sale.
On the third point, CGT_Watcher would note that investor appetite is more nuanced than headlines suggest. Professional advice is recommended on the full tax position before listing.
I sold my BTL flat earlier this year and the single biggest factor in the decision was exactly the direction of travel you are describing, costs going up, tax treatment getting worse, and the regulatory burden increasing with no sign of any of it reversing. A mortgage free property with a reliable tenant is about as good as it gets for a BTL and you are still asking the question, which tells you something. The investor buyer angle is worth considering but I would not overestimate it, because the same Budget changes that are squeezing your returns are squeezing theirs, and a two bed terrace at £235k with £875 rent is a gross yield of about 4.5% before costs, which is basically what you can get in a savings account right now without having to worry about a roof. I would sell in the spring when the market picks up slightly and put the capital somewhere less aggravating, but that is easy for me to say having already done it.
Thank you, @Frankie91, that is really helpful to hear from someone who has actually been through it recently rather than just theorising. I think deep down my husband and I both know the direction of travel is not in our favour, but there is always that nagging feeling of selling at the wrong time.
Can I ask how the sale itself went? Our property is a two bedroom semi, not a flat, so slightly different market I suppose, but I am curious about timescales. Were you dealing with a lot of low offers or did it move reasonably quickly once priced correctly? The idea of sitting on the market through the spring with viewings and uncertainty is probably the thing putting us off more than the tax question, if I am honest.
@Sparrow_Kent2, honest answer is it was not quick and it was not painless. Mine was a one bed flat in a small block so a different proposition to a two bed semi, but the broad experience might still be relevant. I had it priced at what the agent called realistic and what I would call optimistic, got two viewings in the first fortnight and then silence for about three weeks, at which point I dropped the price by five thousand and suddenly had four viewings in a week. The offer I accepted was still about eight percent below my original asking, which stung, but the alternative was sitting there through winter paying for an empty flat while hoping for a better offer that might never come. The whole thing from instruction to completion took about four and a half months, which the solicitor said was fairly normal but felt like an eternity when you are watching money drip out the door on insurance and service charges. The one thing I would say about a two bed semi is that the buyer pool is probably wider than for a one bed leasehold flat, so you might move faster, but I would mentally budget for three to four months minimum and price it to sell rather than to flatter yourselves.
Sell it. I say that as someone who still has two rentals and wishes she had fewer. The direction of travel on landlord taxation is only going one way and the 2% income surcharge from 2027 is just the latest nudge. Unless your yield is genuinely strong after all costs, the numbers stop working very quickly once you factor in the maintenance, the void periods and the emotional overhead. Sentiment aside, cash in savings is a lot less stressful than a tenant and a boiler.
Thank you, @PracticalPenny62, and to everyone else who has replied on this thread. It has been genuinely helpful to hear from people who are either in the same boat or have recently been through it.
My husband and I had a long conversation last night (Christmas Eve eve, nothing like a bit of tax planning over the mince pies) and we have provisionally decided to sell in the new year. The consensus here seems quite clear and it aligns with what we have both been thinking privately but neither of us quite wanted to say out loud. The direction of travel on landlord taxation, particularly the income surcharge from April 2027 that @CGT_Watcher flagged earlier in the autumn, makes the sums increasingly difficult to justify, and the maintenance costs on a two bed semi of that age are not going to get any smaller.
Our current tenants are on a periodic tenancy and have been there for three years. They are good tenants and I feel genuinely awful about disrupting them, but I think we need to be realistic about our own position in retirement. We will speak to a local agent in January to get a realistic valuation and then take it from there.
One thing I am still not entirely clear on is the CGT position given the rate cut and what happened to allowances this year. I know @CGT_Watcher has covered this in other threads but if anyone has a link to a summary or a recent factsheet I would be very grateful.
Thank you all, and Merry Christmas to those celebrating tomorrow.