Selling a Tenanted Property in 2026: CGT, Possession & Sale Routes
UK landlord guide to selling a tenanted property in 2026 — Ground 1A possession, tenant-in-situ sales, CGT at 18/24% and the 60-day reporting deadline.
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# Selling a Tenanted Property in 2026: A Landlord's Guide (CGT, Possession & Sale Routes)
Quick Answer
You can sell a tenanted property in two ways: with vacant possession (after the tenant has moved out) or with the tenant in situ (selling to another landlord or investor). After the Renters' Rights Act removed Section 21, regaining vacant possession requires using Section 8 Ground 1A (intent to sell) with four months' notice — and you cannot have served any other Ground 1 or 1A notice in the previous 12 months. Capital Gains Tax (CGT) will apply on any gain.
Key Takeaways
- Two sale routes: vacant possession or tenant in situ.
- Vacant possession requires Section 8 Ground 1A — 4 months' notice, no re-letting for 12 months.
- Tenant-in-situ sales appeal to investors but typically sell at a 5–15% discount.
- CGT applies — 18% basic / 24% higher rate on residential property gains in 2026.
- Annual CGT exemption is just £3,000 per individual.
What Has Changed?
Section 1A "intent to sell" ground
Introduced by the Renters' Rights Act, Ground 1A lets you regain possession to sell the property. You must:
- Give 4 months' written notice
- Not have used Grounds 1 or 1A on the property in the last 12 months
- Genuinely intend to sell — re-letting within 12 months can trigger a Rent Repayment Order
CGT rates and allowance
The CGT annual exempt amount is £3,000 per individual in 2026 (down from £12,300 in 2022). Higher-rate gains on residential property are taxed at 24% (down from 28% in 2024). Basic-rate gains at 18%.
60-day reporting
You must report and pay CGT within 60 days of completion on UK residential property.
Choosing Between Vacant Possession and Tenant in Situ
Vacant possession sale
Pros
- Sells to a wider market (owner-occupiers and investors).
- Higher achievable price.
- Lender finance available to most buyers.
Cons
- Requires possession proceedings (4 months minimum).
- Risk of court delays.
- Void period during marketing.
Tenant-in-situ sale
Pros
- No void period — rent continues.
- Faster — no possession process needed.
- Avoids enforcement risk under Ground 1A.
Cons
- Buyer pool limited to investors.
- Discount of 5–15% common.
- Buyer's mortgage lender may have restrictions.
- Tenant must agree to viewings.
What Landlords Need To Do Now
Step 1: Decide your route early
Talk to an agent and a tax adviser before serving any notice.
Step 2: Calculate CGT exposure
Use the formula:
- Sale price − purchase price − allowable costs (legal fees, SDLT, improvements) = gain
- Less annual exempt amount (£3,000)
- × 18% or 24% depending on band
Step 3: If selling with vacant possession
- Confirm you have not served Ground 1 or 1A in the last 12 months.
- Serve Form 3 citing Ground 1A with 4 months' notice.
- Diary the move-out date.
- List the property in the final month of the notice.
Step 4: If selling tenanted
- Discuss with the tenant — they may welcome continuity.
- Engage an investor-focused agent.
- Provide buyers with a full data pack: tenancy agreement, rent history, deposit certificate, gas/electrical/EPC certificates.
- Coordinate viewings with proper 24-hour notice.
Step 5: Handle the CGT report
Within 60 days of completion, file a CGT return via your HMRC account and pay any tax due. Late filing triggers automatic penalties.
Step 6: Transfer compliance to the buyer
Hand over a full compliance pack including:
- Deposit transfer details (custodial transfer or new protection by buyer within 30 days)
- All certificates
- Tenancy ledger
- Inventory and check-in report
- Maintenance history
Common Mistakes To Avoid
1. Re-letting within 12 months of a Ground 1A notice
This can trigger a Rent Repayment Order and a £30,000 fine.
2. Serving Ground 1A casually
It can only be used once every 12 months — choose your timing.
3. Missing the 60-day CGT deadline
Late returns trigger fixed penalties plus interest on unpaid tax.
4. Forgetting deposit transfer rules
If you sell with the tenant in situ, the deposit must be properly transferred. The buyer becomes responsible for protection from completion.
5. Failing to disclose tenancy compliance gaps
Buyers and their solicitors will check — undisclosed gaps can collapse a sale at exchange.
6. Marketing while still in proceedings
Don't list until you are confident of vacant possession dates, or you may face delays.
7. Underestimating CGT on jointly owned property
Each owner reports their share separately. Make sure both spouses use their £3,000 allowance.
Frequently Asked Questions
1. Can I sell with the tenant in place?
Yes — typically to investors, at a discount.
2. What is Ground 1A?
A new possession ground for landlords intending to sell, with 4 months' notice.
3. Can I re-let if the sale falls through?
Not within 12 months of serving Ground 1A — without risking a Rent Repayment Order.
4. How long is the CGT reporting deadline?
60 days after completion.
5. What CGT rate applies?
18% basic / 24% higher rate on residential property gains in 2026.
6. Can I claim private residence relief?
Only for periods you lived in the property as your main home, plus the final 9 months.
7. Does selling to my own limited company avoid CGT?
No — it's treated as a market-value disposal for CGT, and triggers SDLT.
8. How do I transfer the deposit to the buyer?
For custodial schemes, request a transfer or repayment-and-re-protection. For insured schemes, the buyer must re-protect within 30 days.
9. What evidence do I need for Ground 1A?
Marketing instructions, estate agent letter, or a sale memorandum.
10. What happens if the tenant doesn't leave?
You issue a Section 8 possession claim after the 4-month notice expires.
11. Should I tell the tenant before serving notice?
Yes — a respectful conversation can avoid contested proceedings.
12. Can a tenant block a sale?
No — they cannot legally block a sale, but they can make viewings difficult. Cooperation usually requires a small incentive.
References
- Renters' Rights Act–2025 — Ground 1A and re-letting restrictions
- HMRC: Report and pay CGT on UK residential property within 60 days
- Taxation of Chargeable Gains Act 1992
- MHCLG: Selling a tenanted property guidance
- Housing Act 1988, Schedule 2
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*Written by the Smart Sleep Property Editorial Team. This article is for general information only and is not a substitute for legal or tax advice.*
Frequently asked questions
Can I sell with the tenant in place?+
Yes — typically to investors at a discount.
What is Ground 1A?+
A possession ground for landlords intending to sell, with 4 months' notice.
Can I re-let if the sale falls through?+
Not within 12 months of serving Ground 1A.
CGT reporting deadline?+
60 days after completion.
What CGT rate applies?+
18% basic / 24% higher rate on residential gains.
Can I claim private residence relief?+
Only for periods you lived there plus the final 9 months.
Does selling to my own company avoid CGT?+
No — market-value disposal and SDLT applies.
How do I transfer the deposit?+
Custodial transfer, or buyer re-protects within 30 days.
What evidence for Ground 1A?+
Marketing instruction or sale memorandum.
What if the tenant doesn't leave?+
Issue a Section 8 possession claim after notice expires.
Tell the tenant first?+
Yes — respectful conversation avoids contested proceedings.
Can a tenant block a sale?+
No, but cooperation on viewings usually requires an incentive.
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