Hello, I am new to the forum and I would be grateful for some advice. My husband and I own a buy-to-let property in Kent which we purchased jointly in 2007 for £185,000. It is a three-bedroom semi-detached and we have let it continuously since purchase. We have never lived in it ourselves. A local estate agent valued it recently at around £310,000.
We are both recently retired and the property is becoming more of a headache than it is worth. The boiler needed replacing last winter, there is a damp issue in the downstairs bathroom that keeps recurring, and our tenants, who are lovely, have been asking about various repairs that we simply cannot keep funding from the rental income alone. We are starting to wonder whether it makes more sense to sell.
My concern is around capital gains tax. I have read the thread on here about the Autumn Budget and I understand the CGT rates on residential property have stayed at 18% and 24%, which is something at least. However, I am unclear on a few things.
Firstly, given that we own the property jointly, I presume the gain would be split equally between us and we would each use our own annual exempt amount? I believe the annual exempt amount is now £3,000 each. Secondly, does the timing of the sale within the tax year matter much, or is it simply a question of which tax year the completion falls in? And thirdly, with talk of a possible rate cut in December, would there be any reason to hold off selling until the spring if the market might pick up, or is that just speculation?
I appreciate this is a lot of questions in one post. Many thanks in advance for any guidance.
On the first point, yes. Where a property is held as joint tenants (which is the most common arrangement for married couples), the gain is split 50/50 and each of you has access to the £3,000 annual exempt amount for 2025/26. So that is £6,000 of gain sheltered between you before CGT applies.
On the second point, CGT is triggered on the date of completion, not exchange. So the tax year in which completion falls determines which year’s allowances and rate bands apply. If completion falls after 5 April 2026, it would be the 2026/27 tax year. Note also that for residential property disposals, you are required to file a CGT return and make a payment on account within 60 days of completion. This is separate from the self-assessment return.
On the market timing question, that is outside the scope of tax advice. Professional advice should be taken on the full computation, particularly regarding allowable costs and any improvements made over the ownership period.
I sold a BTL flat back in September and spent weeks agonising over whether to wait for the spring market or just get on with it, and honestly the relief of having it done was worth more than any hypothetical extra few thousand. The Nationwide data out last week showed prices basically flat in October and London actually dropping, so it is not as though the market is screaming upward. You could wait six months and find yourself in exactly the same position but with another boiler repair and a damp problem that has got worse. The only thing I would say is make sure you have somewhere sensible to park the proceeds, because savings rates are quietly slipping now that lenders are pricing in a December cut, and you do not want the money sitting in a current account earning nothing while you figure out your next move.
Thank you both for your replies, this is very helpful.
@CGT_Watcher, that is much clearer now regarding the 50/50 split and the annual exempt amounts. I had not appreciated that we could each use our allowance separately, which does make the numbers a bit more manageable.
@Frankie91, I completely understand the sense of relief you describe. My husband keeps saying much the same thing, that the hassle of being a landlord at our age is not worth the modest income.
One further question if I may. Our eldest son is currently renting and has been talking about buying his first property. We had briefly discussed whether it might make sense to gift the Kent house to him rather than selling on the open market, perhaps at a reduced price or as an outright gift. I understand this would still be treated as a disposal at market value for CGT purposes, but I wanted to check whether there are any reliefs or allowances that might apply differently in a parent to child transfer, or whether it is essentially the same computation either way.
I realise this is getting into territory where we probably need proper advice, but any pointers would be very welcome. Thank you.
A gift of residential property to a connected person is treated as a disposal at market value for CGT, as you suspected. The gain is computed as if you had sold at that value regardless of any actual consideration received.
Hold-over relief under s.165 TCGA 1992 is not available for residential property. Gift relief under s.260 is limited to specific situations such as chargeable transfers for IHT, which would not normally apply to a lifetime gift within the nil-rate band.
In short, the CGT position is essentially the same whether you sell on the open market or gift to your son. The difference is that a gift may have IHT implications if either of you were to die within seven years. Professional advice is strongly recommended here given the amounts involved.
Thank you again @CGT_Watcher for clarifying the position on gifts. We have decided that we will not be gifting the property itself, as the CGT implications are too significant.
However, I do have a follow-up question if you do not mind. If we sell the property and then gift some of the proceeds (after tax) to our daughter to help her with a deposit, is there anything we need to be aware of from a tax perspective? I understand that cash gifts between individuals are not subject to CGT, but I am thinking more about whether the gift could create issues for her mortgage application, or whether there are IHT implications if the amount is above the annual gift exemption.
We are likely talking about a sum of around £40,000 to £50,000. My husband and I are both in good health and have no intention of going anywhere soon, but I would rather understand the position clearly before we commit to anything. Many thanks.
One timing point worth noting. The Bank of England held at 4% last week but the market is now pricing in a December cut as more likely than not. If you are planning to sell the BTL property in the spring, a rate reduction could marginally improve buyer demand and therefore the achievable price, which in turn affects the gain calculation. It does not change the CGT rate or reporting deadline but it is a factor in the net outcome. Worth discussing with your agent closer to the time.
Hello, I wanted to update everyone who has been so helpful on this thread. My husband and I have had a good long discussion over the past few days and we have decided that we will put the property on the market in January. We had been going back and forth about whether to wait for the new tax year in April, but having looked at the numbers again with the help of the information on here, the difference in CGT between selling now and selling after April is not as dramatic as we feared, and we would rather get the process moving before spring when more properties tend to come onto the market.
@CGT_Watcher, your point about a possible rate cut before Christmas is interesting. I saw something on the news this morning about the Bank of England governor saying cuts are coming, which I suppose is encouraging for buyers if nothing else. I am not sure it changes much for us directly but presumably if rates do come down a little, there might be more buyers around in January than there would have been otherwise.
I have two practical questions if anyone can help. First, we have not used an estate agent in over thirty years. Is it now standard to go with online agents like Purplebright or whatever they are called, or is a local high street agent still the better option for a three bedroom terrace in a Kent town? Second, when the agent values the property, should we mention that the boiler was replaced last year and the roof was redone in 2021, or do they only care about comparable sales?
Many thanks as always.
On the estate agent question, I sold my flat through a local high street agent and would do the same again for anything in a specific area where the agent actually knows the local market and the buyers looking in it. The online agents are fine if you are in a hot market where anything with a front door sells itself, but for a three bed terrace in a Kent town where you want someone who can talk knowledgeably about the schools and the parking and which end of the street floods, a decent local agent earns their fee. Mine charged 1.2% plus VAT which felt painful at the time but they handled several awkward viewings and a chain wobble without me having to lift a finger. On the boiler and roof, yes absolutely mention it, a good agent will put it in the listing and it matters to buyers who are comparing two similar houses and trying to work out which one won’t cost them five grand in the first year.