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What is Capital growth?
Last verified 31 October 2026
Capital growth is the increase in a property's value over time. It is separate from rental income and is only a taxable gain when you sell or otherwise dispose of the property.
Why it matters to landlords
Landlords often buy for a mix of yield and growth, but they are taxed very differently. Rent is taxed each year as income. Growth is untaxed while you hold the property and counts only when you dispose of it. GOV.UK says Capital Gains Tax may apply on profit from selling non-home property such as buy-to-let, and that you generally must report and pay on most UK property sales within 60 days.
You work out the gain to see whether tax is due. Gifts to a spouse or civil partner or a charity are usually not taxed. Different rules apply when you sell your own home. Keep records of the purchase price and any improvement costs, because they feed into the gain calculation. A paper rise in value that you have not realised creates no tax bill.
Example
Alan bought a rental house for £180,000 and it is now worth £230,000, a growth of £50,000 or about 28%. He pays no Capital Gains Tax while he keeps it. If he sells, the gain is worked out after costs, and he generally must report and pay within 60 days.
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Related terms
- Capital Gains Tax (CGT)
- 60 day Capital Gains Tax reporting
- Rental yield
- Base cost
- Private residence relief