Selling a buy-to-let in 2026 — a CGT vs Section 24 vs RRA decision tree

Written and reviewed by the South Yorkshire Property Buyers team (a trading name of Bullseye Properties Ltd, company 14869608, previously Lord CNB Properties Ltd until 18 April 2024). Published 1 June 2026. Last reviewed: 2 June 2026.

Why 2026 is the year the BTL maths broke

For roughly two decades, the private rented sector ran on a quiet set of assumptions: mortgage interest was fully deductible, Capital Gains Tax on residential property topped out at 28% (and was usually less), a Section 21 notice cleared a tenancy in two months, and EPC compliance was a checkbox rather than a capital-expenditure project. Every one of those assumptions has been rewritten in the last eight years, and the rewrites compound.

The most recent National Residential Landlords Association data captures the result. In its Q4 2025 Landlord Confidence Index — published in February 2026 — 41% of landlords reported plans to sell at least one property in the following twelve months, the highest sell intent the index has recorded. Smaller portfolios (one to five properties) were most likely to exit, and 1.93 properties came to market for every one purchased among NRLA members. The numbers do not describe a rational market correction. They describe a sector under simultaneous pressure from three policy regimes, and a lot of small landlords concluding that the post-tax, post-compliance return no longer pays for the risk.

This guide walks through the three pressures one at a time, then assembles them into a decision tree you can apply to your own property. If after that you decide to sell, our companion piece — sell a house with tenants in situ — covers the economics of a tenanted-sale exit in detail.

Pressure 1: Capital Gains Tax at 24% on residential property

The October 2024 Budget reshaped CGT for residential property. For disposals on or after 30 October 2024, the rates on residential gains are 18% for the basic-rate slice and 24% for the higher-rate slice. The previous 28% upper rate is gone, but for landlords paying tax above the basic-rate threshold the effective rate has not moved much in practice, because the 4-point cut was paired with the much larger reduction of the annual exempt amount (AEA).

The AEA — the slice of gain that escapes CGT entirely each year — was £12,300 as recently as 2022/23. It was cut to £6,000 from April 2023, then to £3,000 from April 2024, and it remains £3,000 for both 2025/26 and 2026/27 under HMRC's published CGT rates and allowances. For a typical Yorkshire BTL bought in the late 2000s or 2010s, the AEA now shelters less than the first year's HPI growth on a single property.

The reporting deadline is the other piece most landlords still get wrong. Since 27 October 2021, an individual disposing of UK residential property at a gain must report and pay the tax within 60 days of completion using HMRC's Capital Gains Tax on UK property service. Miss it and the penalties start automatically — £100 immediately, daily penalties at six months, and interest on the unpaid tax. Your annual Self Assessment return is not the right vehicle for this disposal; it is a separate, prior return.

Worked CGT example — Sheffield BTL bought in 2014

To make the abstract concrete, take a single Sheffield ex-rental terrace.

• Acquired August 2014 for £105,000, including SDLT and legal costs (base cost)
• Capital improvements (kitchen, full rewire): £14,000
• Sale price June 2026: £215,000
• Sale costs (agent + solicitor): £4,800
• Gain: £215,000 − £105,000 − £14,000 − £4,800 = £91,200
• Less AEA £3,000 = £88,200 taxable

If the seller is a higher-rate taxpayer with no unused basic-rate band, the full £88,200 is taxed at 24% — a CGT bill of £21,168, payable within 60 days of completion. If the seller has £10,000 of unused basic-rate band, the first £10,000 is taxed at 18% (£1,800) and the remaining £78,200 at 24% (£18,768), total £20,568. The arithmetic punishes higher-rate landlords disproportionately, which is exactly the design.

Pressure 2: Section 24, fully phased and biting

Section 24 of the Finance (No. 2) Act 2015 — sometimes called the "tenant tax" — restricted income tax relief on residential finance costs for individual landlords. It was phased in from April 2017 (75% deduction, 25% credit), tightened each year, and has applied in full from the 2020/21 tax year. The mechanism is simple but its consequences are not. Landlords no longer deduct mortgage interest from rental income to arrive at taxable profit. Instead, the full rent is taxed at the landlord's marginal rate, and a basic-rate (20%) tax reducer is applied for finance costs at the end of the calculation. HMRC's technical guidance sets out the worked examples.

For unleveraged landlords with no mortgage, Section 24 is a non-event. For higher-rate (40%) and additional-rate (45%) landlords with loan-to-value above about 50%, it can flip a paper profit into a real-world loss after tax.

Worked Section 24 example — same Sheffield property, geared

• Annual rent: £9,600 (£800 pcm)
• Mortgage interest (BTL fix at 5.4%, £140,000 outstanding): £7,560
• Allowable non-finance costs (insurance, repairs, gas safety, agent at 10%): £1,560
• Pre-Section 24 cash flow: £9,600 − £7,560 − £1,560 = £480

Under the pre-2017 rules, taxable profit would have been £480 and a higher-rate landlord would have paid £192 tax, leaving £288 a year. Under Section 24, the calculation runs differently:

• Taxable rental profit (before finance cost relief): £9,600 − £1,560 = £8,040
• Income tax at 40%: £3,216
• Less basic-rate (20%) credit on £7,560 of interest: £1,512
• Net tax: £1,704
• Post-tax cash flow: £480 − £1,704 = −£1,224

The landlord is losing £102 a month after tax on a property that looks marginally profitable on paper. Add a single boiler replacement or one void month and the numbers worsen sharply. This is the silent reason that small, higher-rate landlords on legacy mortgages are quietly heading for the door — and why portfolio investors and limited companies (where Corporation Tax applies and finance costs remain fully deductible) are circling the same stock as buyers.

Pressure 3: The Renters Rights Act 2025, live since 1 May 2026

The Renters Rights Act 2025 received Royal Assent on 27 October 2025. Its main private-rented-sector provisions commenced on 1 May 2026, which means the rules in this section are now law, not a forthcoming reform. The headline changes:

• Section 21 no-fault evictions abolished for all assured tenancies in England.
• New fixed-term ASTs ended — all new tenancies are periodic from day one. Existing fixed-terms convert at the end of their term.
• New possession grounds, including Ground 1A (sale of dwelling-house), which requires the landlord to have let the property for at least twelve months and to give four months' notice.
• Private Rented Sector Database — every landlord and dwelling must be registered.
• PRS Ombudsman — mandatory membership; tenants can escalate complaints without court.
• Rent increases limited to once per year and challengeable at the First-tier Tribunal.
• Decent Homes Standard and Awaab's Law extended to the PRS in stages.
• MEES EPC C trajectory — a separate stream of regulation, but inseparable in practice. The 2026 spending review confirmed the consulted timetable of EPC C for new tenancies from 2028 and all tenancies from 2030.

For a landlord deciding whether to sell, three of these matter most. Ground 1A replaces what used to be a Section 21 notice if your reason for ending the tenancy is a sale, and four months is a real holding cost. The PRS Database is a one-off compliance burden but the public profile it creates changes the dynamic of disputes. And the EPC C trajectory is the capital expenditure question that does not go away — every D, E or F rated stock unit you keep beyond 2027 will need work, with the cap level and any exemption regime to be finalised in secondary legislation.

For background on the wider reforms see gov.uk's Renters Rights Act collection.

The decision tree

Below is the framework. Run a property through it on a single side of A4 before talking to anyone. The aim is not to produce a number to three decimal places — it is to make sure you have asked all four questions, in the right order.

Step 1 — Calculate your net-of-CGT exit price

Take today's realistic vacant-possession price (not the asking price you would test on the open market). Deduct sale costs of around 2-3%. Calculate the gain. Deduct the £3,000 AEA. Apply 18% to any unused basic-rate band slice, and 24% to the rest. That is your net-of-CGT exit price. Do not include any private residence relief unless the property was your main home at some point — if it was, get this calculated by an accountant because PRR and Letting Relief interactions are not back-of-envelope work.

Step 2 — Calculate your post-Section 24 net yield, today

Take twelve months of rent. Deduct allowable non-finance costs. Calculate tax at your marginal rate. Apply the 20% finance-cost credit. Subtract from cash flow. Divide the result by your net-of-CGT exit price from Step 1 — not by your purchase price. That gives you your real, after-tax net yield on the capital you would receive if you sold. If that number is below the rate on a five-year gilt or a fixed-rate cash ISA, you are paying yourself less to take property risk than you would earn taking no risk.

Step 3 — Add the RRA-2025 compliance load

Estimate, honestly, the next five years' capital expenditure if you hold. EPC C upgrade if the property is below C — typically £3,000 to £12,000 depending on construction. Database and Ombudsman fees. Allowance for one tribunal-tested rent increase, or none. The cost of one Ground 1A possession at four months' rent foregone plus £1,500 legal. Subtract this from five years of your net yield from Step 2. This is your retained-hold value.

Step 4 — The honest question

Would you buy this property today at its current market price, with full knowledge of Section 24, 24% CGT on the eventual exit, and the RRA compliance regime? If the honest answer is no, you are holding it because of inertia and (probably) the dread of the CGT bill. The CGT bill does not go away by waiting — gains compound, and rates have not fallen in any of the last four Budgets. Sell.

If the honest answer is yes, hold. The maths is working for you and the policy regime is now stable enough to plan against.

Sell with tenants in situ, or with vacant possession?

This is the second decision, and it is often more economically significant than the first. The default assumption — that you must end the tenancy and sell vacant — is the most expensive choice for most small landlords in 2026. It is correct only if the buyer pool you intend to access is owner-occupiers.

The vacant-possession route

• Serve a Ground 1A notice (four months) — and only after the tenancy has been in place for at least twelve months.
• Accept four months of either reduced rent (if the tenant cooperates) or rent risk (if they do not).
• Refurbish to owner-occupier standard.
• List with an estate agent at a vacant-possession asking price.
• Allow four to six months from listing to completion in the current market.

Net result: roughly eight to ten months from decision to completion, with the highest gross price but the highest holding cost and lowest certainty. Suitable for properties in genuinely owner-occupier-strong locations and in good cosmetic order.

The tenant-in-situ route

• Notify the tenant in writing of your intent to sell the freehold subject to the tenancy.
• Approach landlord buyers directly — portfolio investors, hybrid agencies and specialist cash buyers.
• Sale proceeds at the investment value, typically a 10-15% discount to the vacant-possession value.
• Rent continues to flow throughout the sale process.
• Completion is usually 4-8 weeks.

Net result: lower gross price, but no void rent, no eviction cost, no refurbishment spend, and a much shorter sale window. For most leveraged small landlords running the Step-2 maths above, the tenanted route produces a higher net-of-everything outcome — because the eight months of void rent and Section-24-taxed-into-loss holding is often worth more than the 10-15% gross price gap. We unpack the full economics, including how investment yield drives the discount, in our companion deep guide: selling a house with tenants in situ.

What changes if you operate through a limited company?

Limited-company landlords sit in a different tax regime and face a different decision tree, though most of the other pressures are identical.

• Section 24 does not apply — finance costs remain fully deductible against Corporation Tax.
• Corporation Tax on rental profits at the main rate of 25% (with the small profits rate of 19% up to £50,000 and marginal relief tapering between £50,000 and £250,000) under the 2023 regime.
• Chargeable gains on disposal taxed at Corporation Tax rates, not at the personal CGT 18%/24% rates. No AEA. Indexation allowance frozen at December 2017.
• Extraction of post-tax profits via dividends or salary adds a second layer of personal tax.

For company landlords, the CGT-vs-Section-24 axis collapses into a single Corporation Tax line, and the RRA compliance load is identical. The honest Step-4 question is the same — would you buy this property today at this price? — but the maths in Steps 1 and 2 looks meaningfully different. Speak to your accountant about the interaction between corporate disposal, capital distribution and any business asset disposal relief that might be available on winding-up.

Where prices are likely to head as the supply wave plays out

The 41% sell-intent figure from the NRLA is not yet fully reflected in completed transactions. Rightmove and Zoopla index data through Q1 2026 shows ex-rental stock running at about 18% of all new listings in northern English markets, materially above the 12-13% long-run norm. Where the supply concentrates — typically two- and three-bedroom terraces in mid-market postcodes — first-time buyer competition has thinned, partly because deposit affordability has weakened and partly because the same stock at vacant-possession prices is competing with newer-build alternatives.

Three implications for sellers running this decision tree now:

1. Vacant-possession asking prices in heavy-supply areas are softer than headline HPI suggests. A 5-8% discount to estate agent valuation is currently realistic for completion within a marketing window of 90 days.
2. Tenanted-sale discounts are narrowing because portfolio buyer demand has firmed up — limited company landlords, build-to-rent operators and overseas investors are all active. The gap between vacant-possession and tenanted-sale price is closer to 10% than the 15-18% that was typical in 2023-24.
3. Properties below EPC C are trading at a measurable discount. Industry analysis through 2025 has consistently shown 3-7% lower transaction prices for EPC D-and-below stock versus comparable C-and-above. The discount is concentrated in landlord-buyer markets, because owner-occupiers are less likely to price EPC risk explicitly.

What this means is that the "wait for a better market" argument is weaker in 2026 than it has been at any point since the GFC. There is no realistic policy reversal on Section 24, no proposed re-expansion of the CGT AEA, and no parliamentary appetite for unwinding the RRA. The supply wave is not yet exhausted.

Edge cases worth flagging

Accidental landlords (inherited property, former main residence)

If the property was once your main home, Private Residence Relief may shelter some or all of the gain — proportionally to the time it was your main home plus a final-period allowance (currently 9 months). Get this professionally calculated. The wider point is that accidental landlords are usually unleveraged, which removes Section 24 from the equation. The decision then comes down to RRA compliance and ongoing repair risk, not tax. Many accidental landlords in 2026 are net better off selling, but the case is closer than for geared higher-rate landlords.

Holiday-let conversion to long-let, or vice versa

The Furnished Holiday Let regime was abolished from 6 April 2025. Properties that were FHLs are now taxed as ordinary residential lets — meaning Section 24 applies, the AEA on disposal is the personal £3,000, and there is no longer Business Asset Disposal Relief on sale. Many former FHL operators face a worse calculation than long-let landlords and should run the tree carefully.

HMOs and Article 4 areas

HMO economics survive Section 24 better than single-let because gross yields are higher. But HMO refurbishment costs to reach EPC C are also higher, and the RRA compliance burden is more complex (more tenants, more notices, more potential for disputes through the Ombudsman). Decision: HMO landlords with newer stock and good per-room yields generally hold; HMO landlords with older stock and approaching licensing renewal often sell.

Negative equity

Where leveraged purchases at peak 2022 valuations have moved sideways since, some landlords face flat or slightly negative equity at today's prices. Selling here triggers a CGT loss (which can be carried forward) but no cash receipt. The decision is then driven by Section 24 cash flow alone — and for many higher-rate landlords running monthly losses, even a break-even sale stops the bleeding.

What the cash-buyer route looks like for landlords selling now

South Yorkshire Property Buyers buys directly from landlords in cash across Sheffield, Rotherham, Doncaster, Barnsley and the surrounding Yorkshire and Nottinghamshire markets. The price will be at roughly 80-85% of vacant-possession market value, which we are open about — it is the cost of certainty, speed and the elimination of agent fees, refurbishment costs, void rent, eviction risk and chain-dependent fall-through.

What we can do that an estate agent cannot:

• Buy with tenants in situ — no Ground 1A notice, no four-month wait, no void rent. We take over as the new freeholder and the tenancy continues.
• Complete in 7-28 days on a fixed date you control.
• Cover your legal fees via our panel solicitors.
• Buy regardless of condition — including properties below EPC C, with outstanding repair items, or with active disrepair complaints.
• Buy portfolios as one transaction, which removes most of the chain risk involved in liquidating multiple properties in sequence.

If the answer to the honest Step-4 question is "sell," the next question is the gross price you are achievable on. For a portfolio, or for a single property in average condition with a paying tenant, a tenanted cash sale almost always nets more after tax, void rent and refurbishment than a vacant-possession agent sale. Run the numbers both ways before committing. For the deep-dive on tenanted sales, again, see our companion guide.

Buy-to-let exit FAQs