Do you pay capital gains tax when you sell a holiday let?

Yes. Since 6 April 2025 a holiday let is sold like any other property that is not your home: capital gains tax at 18% on the part of the gain that fits inside your basic rate band and 24% on the rest, after a £3,000 tax-free allowance, reported and paid within 60 days of completion. The business reliefs that used to cut the bill went with the furnished holiday lettings regime, and the single exception that survives closes for good on 5 April 2028.

That exception is the part most owners have not been told about, so it gets its own section below. Everything else here is the arithmetic, the two dates that decide which tax year the sale lands in, what happens to the bookings already in the diary, and a question worth asking before the board goes up.

The capital gains tax rate on a holiday let sale

The gain is taxed at the residential property rates, which have been 18% and 24% since 6 April 2024. Which one you pay depends on your income in the tax year of the sale, and GOV.UK sets out the method in five steps:

1. Work out your taxable income for the year: everything you earn, less your Personal Allowance and any other income tax reliefs.
2. Work out your total taxable gains for the year.
3. Take off the tax-free allowance, which is £3,000 for 2026-27.
4. Add what is left to your taxable income.
5. If the total sits inside the basic rate band, the gain is taxed at 18%. Anything above the band is taxed at 24%.

The basic rate band is £37,700 for 2026-27. A higher or additional rate taxpayer has no band left, so the whole gain is taxed at 24%. A basic rate taxpayer with £20,000 of taxable income has £17,700 of band spare, so the first £17,700 of gain is taxed at 18% and the rest at 24%. A gain on a holiday let is often large enough to cross the band, which is why many owners end up paying a blend of the two.

If you are a Scottish taxpayer, the UK band still applies. Capital gains tax is a UK-wide tax. The Office of Tax Simplification put it plainly in its 2020 review: Scottish taxpayers use the UK income tax bands to decide whether they are basic or higher rate for capital gains tax purposes, even though their income tax bands are different.

If you own it jointly, each owner works out their own gain. Each of you reports your share, and each of you has your own £3,000 allowance and your own band. A property held between two basic rate taxpayers is taxed more gently than the same property held by one higher rate taxpayer, which is a point for an accountant before the sale rather than after it.

What went when the furnished holiday lettings regime ended

Until 5 April 2025 a qualifying holiday let was treated as a trading business asset for capital gains purposes. That status carried four reliefs, and HMRC’s policy paper lists them: roll-over relief, business asset disposal relief, gift relief and relief for loans to traders. From 6 April 2025 a holiday let is eligible for none of them.

In practice the two that mattered to a cottage owner were these.

• Business asset disposal relief taxed the gain at 10% instead of the residential rates. HMRC’s Capital Gains Manual now says relief will not be available where there is a disposal of the whole or part of an FHL business on or after 6 April 2025.
• Roll-over relief let you defer the gain by buying another qualifying business asset. It is not available where the replacement asset is acquired on or after 6 April 2025, so selling one cottage to buy another no longer defers anything.

An anti-forestalling rule also runs from 6 March 2024. It catches an unconditional contract signed before 6 April 2025 that completed on or after it, where the point of the arrangement was to lock in the old treatment. If your sale straddled that date, the claim needs a statement that the contract had no such purpose, and that is accountant territory.

The one door still open, and the day it shuts

Business asset disposal relief can still apply to a holiday let sold today, on one condition: the letting business actually stopped before 6 April 2025. HMRC’s manual is specific. Relief may still be available where the claim is based on a disposal of assets used in a business following the cessation of that business, and there was an actual cessation of an FHL business before 6 April 2025. HMRC’s clarification note defines the cessation date as the point from which there are no longer any bookings or lettings nor any intention to resume such activity in future, and says the repeal of the FHL provisions does not mean a business has ceased; it merely disapplies the legislation. A cottage that carried on taking guests through 2025 has not ceased, whatever its tax status.

The disposal then has to fall within the normal three-year period following cessation, which is the ordinary rule for selling the assets of a business that has closed. So a cottage whose last guests left in February 2025, and which has sat unlet since, can still be sold with the relief until February 2028. The latest possible cessation date was 5 April 2025, which makes 5 April 2028 the last day the door can be open for anyone. The other conditions still apply too: the business had to qualify throughout the two years before it stopped, the claim is made on the Self Assessment return, and the deadline for a 2026-27 disposal is 31 January 2029.

Two things have moved against the relief since. The rate it charges is no longer 10%: it rose to 14% for disposals from 6 April 2025 and to 18% from 6 April 2026. And Budget 2026, published on 28 October 2026, cuts the lifetime limit on gains that can use it from £1 million to £500,000 from 6 April 2027. For a single cottage the limit rarely bites, but 18% against 24% is still a quarter off the bill on the taxable gain, and that is worth a conversation with an accountant if your property genuinely stopped trading before the regime ended.

Working out the gain

The gain is usually the difference between what you paid for the property and what you got for it. Three sets of costs come off before the allowance, and GOV.UK names them: the fees you paid solicitors and estate agents, and the cost of improvement works such as an extension. A new kitchen or a converted outbuilding counts as improvement. Decorating and other normal maintenance does not, and neither does mortgage interest, which was never a capital cost.

Two rules catch holiday let owners in particular. If you gave the property away, or sold it to a family member for less than it was worth, the market value is used instead of the price. And if you inherited it, the gain runs from its value at the date of death, so a cottage that has been in the family for decades can carry a smaller gain than its sale price suggests.

The two dates that decide when you pay

A property sale has two dates, and the tax uses both.

Exchange of contracts fixes the tax year. HMRC’s manual is clear that where an asset is disposed of under an unconditional contract, the date of disposal is the date the contract is made. Exchange on 2 April and the gain belongs to the tax year that ends on 5 April, with that year’s income deciding your rate, even if completion is weeks later. An owner on the edge of the basic rate band can find that a week’s difference in exchange date changes the bill.

Completion starts the 60-day clock. You must report and pay any capital gains tax due on a UK residential property within 60 days of completing the sale, through HMRC’s online property account, and you may have to pay interest and a penalty if you do not. If your total gains for the year are under the £3,000 allowance you do not need to report online. If you already fill in a Self Assessment return, the sale still goes on it, with the tax you paid within the 60 days credited against the final figure.

Miss the 60 days and the penalty runs regardless of whether you got the sum right. Put the date in the diary on the day you accept an offer.

If the property was ever your own home

Private Residence Relief covers the part of the gain that matches the time you lived in the property as your only or main home. HMRC’s helpsheet sets the method: multiply the gain by the fraction of your ownership during which it was your main residence, and that fraction of the gain is relieved. The final nine months of ownership always count as if you lived there, provided it was your main home at some point, so a house you lived in for ten years and let as a holiday cottage for five is relieved on ten years and nine months out of fifteen.

Two details matter. If you had two homes at once, you can nominate which is the main one, and the nomination has to be made within two years of first having that combination of homes. And letting relief, which many owners remember from before 2020, now applies only where part of the house was let while you were living in another part of it. A cottage you let whole while living elsewhere gets none of it.

A second home or a cottage bought purely to let, which you never lived in, gets no Private Residence Relief at all. The whole gain is chargeable.

The bookings already in the diary

A sale rarely lines up with an empty calendar, and this is the part no tax guide covers. Airbnb’s host cancellation policy charges a fee for a confirmed booking you cancel: 10% of the reservation amount if you cancel more than 30 days before check-in, 25% between 48 hours and 30 days out, and 50% within 48 hours or after check-in, with a minimum of 50 US dollars. Airbnb can also block the calendar for the cancelled dates and remove Superhost status. The direct bookings and agency bookings you hold have their own cancellation terms, and a deposit a guest paid you is a debt you owe back.

The clean method is to stop taking bookings beyond the date you expect to complete on the day you decide to sell, then complete after the last guest leaves. The alternative is to agree with the buyer that they will honour the remaining stays, which works where they intend to carry on letting and needs the solicitor to write it into the contract. Either way, settle it before the property is marketed. Cancelling a summer of bookings in a hurry is the most expensive version of this decision, and the one that also puts your Superhost status at risk.

Remember too that you need a valid Energy Performance Certificate before the property is marketed for sale. The EPC guide covers the duty and the fine.

The question to ask before the board goes up

Most holiday lets are put on the market for one of two reasons: the owner’s life has moved on, or the diary has gone quiet and the sums no longer work. The first is a decision only you can make. The second is worth testing before you pay the tax on it, because a quiet diary is almost always a marketing problem. The listing is positioned for nobody in particular, it sits on one platform, the price never moves, and the winter is written off. Those are fixable in a season, and fixing them is what our management service exists to do.

So before you instruct an agent, find out what the property would earn properly marketed. The free valuation gives you a realistic figure for your property, with its assumptions stated, and that figure is the one to set against the net proceeds of a sale. If the let still loses, sell with a clear conscience. If it wins, you keep an appreciating asset and the income, and you can leave with thirty days’ notice, any time, which is a good deal more reversible than completion.

An empty second home is its own problem, with its own council tax bill. What to do with a second home sitting empty covers the premium and the options, and how to declare the income covers the tax while you still own it.

Frequently asked questions

Do I pay capital gains tax if I sell a holiday let to buy another one?

Yes. Roll-over relief let a furnished holiday let owner defer the gain by reinvesting in another qualifying business asset, and HMRC’s manual says it is not available where the replacement asset is acquired on or after 6 April 2025. The gain on the sale is taxed in the normal way, and the new property starts with its own base cost.

Can I still claim business asset disposal relief on a holiday let?

Only if your letting business actually ceased before 6 April 2025 and you sell within three years of it stopping, having met the conditions for the two years before that. HMRC says the abolition of the FHL rules does not itself count as a cessation. The relief is charged at 18% for disposals from 6 April 2026, and the latest possible qualifying sale date is 5 April 2028.

Do I have to report the sale to HMRC if there is no tax to pay?

If you are UK resident and your total gains for the year are below the £3,000 allowance, GOV.UK says you do not need to report them online. If you are not UK resident you must report every disposal of UK property within 60 days whether or not tax is due. Anyone already in Self Assessment includes the sale on their return either way.

Is capital gains tax different in Scotland or Wales?

No. Capital gains tax is not devolved, so the rates and the £3,000 allowance are the same across the UK, and a Scottish taxpayer uses the UK basic rate band of £37,700 to work out how much of the gain is taxed at 18%, even though their income tax bands differ. Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales are paid by the buyer, and do not change your capital gains position.

Sources

Every source below was read at GOV.UK or in an HMRC manual on 9 November 2026 unless stated.

• GOV.UK: Capital Gains Tax: rates (the 18% and 24% rates for 2026-27, the five-step method, the £37,700 basic rate band, the £3,000 allowance and the two worked examples)
• GOV.UK: Capital Gains Tax rates and allowances (page updated 13 April 2026: residential property at 18% and 24% from 6 April 2024, the annual exempt amount of £3,000 from 2024-25, and business asset disposal relief at 10%, 14% from 6 April 2025 and 18% from 6 April 2026)
• HMRC: Abolition of the furnished holiday lettings tax regime (policy paper updated 7 November 2024: the four reliefs withdrawn, the transitional rule for a business that ceased before the commencement date, and the anti-forestalling rule from 6 March 2024)
• HMRC Capital Gains Manual: CG73505, furnished holiday lettings: consequences of abolition (page updated 9 November 2026: no business asset disposal relief for a disposal on or after 6 April 2025 unless there was an actual cessation before that date, abolition is not itself a cessation, roll-over relief where the replacement is acquired on or after 6 April 2025, and the anti-forestalling conditions in Schedule 5 to the Finance Act 2025)
• HMRC: Clarification on abolition of the furnished holiday lettings tax regime (updated 7 November 2024: the cessation date is the date from which there are no longer any bookings or lettings nor any intention to resume, and the repeal itself is not a cessation)
• GOV.UK: Business Asset Disposal Relief (the rates by disposal date, the two-year condition and the three years to dispose of assets after closing) and HS275 Business Asset Disposal Relief (2025) (the £1 million lifetime limit, the three-year cessation rule and the claim deadline of the first anniversary of 31 January following the tax year)
• HM Treasury: Budget 2026 (published 28 October 2026: the business asset disposal relief lifetime limit reduced to £500,000 from 6 April 2027)
• GOV.UK: Tax when you sell property: work out your gain (solicitors’ and estate agents’ fees and improvement works deductible, normal maintenance such as decorating excluded, market value for gifts and for inherited property, and each joint owner working out their own share)
• HMRC Capital Gains Manual: CG14250, date of disposal under a contract (the date of disposal under an unconditional contract is the date the contract is made)
• GOV.UK: Report and pay your Capital Gains Tax: if you sold a property in the UK on or after 6 April 2020 (60 days from completion, interest and penalties, no online report needed where gains are under the allowance, non-residents reporting every disposal, and including the sale on a Self Assessment return)
• GOV.UK: HS283 Private Residence Relief (2025) (the fraction of ownership method, the final nine months, the two-year window to nominate a main residence, and lettings relief only where part of the house was let while another part was your home) and Tax when you sell your home: let out part of your home (the £40,000 cap)
• Office of Tax Simplification: Capital Gains Tax review, first report (November 2020, paragraphs 2.4 and 2.5: capital gains tax rates are the same UK-wide, and Scottish taxpayers use the UK income tax bands to decide whether they are basic or higher rate for the purpose)
• Airbnb Help Centre: Host Cancellation Policy for homes (the 10%, 25% and 50% fees, the 50 US dollar minimum, calendar blocking and Superhost status; read 9 November 2026)
• The arithmetic in the second figure is illustrative and is stated as such on the page. No figure for what a holiday let earns appears in this guide; the valuation gives you one for your own property with its assumptions stated.