Sell, Let or Buy-to-Let Lab · Methodology

How the calculation works

Compare three uses of the same starting resources: sell the current property and invest the net proceeds, retain it as a personally owned residential rental, or sell it and acquire a separate purpose-selected buy-to-let.

Return to calculator

Included

Net equity released after the current mortgage, selling costs and estimated CGT
A common additional-cash amount
Repayment and interest-only mortgages
Rental income, voids, management, maintenance and fixed running costs
Restricted residential finance-cost tax relief for individual landlords
Announced property-income tax rates from April 2027 through editable inputs
Incremental SDLT, LBTT or LTT on the next home when the old home is retained
Additional-property purchase tax and buying costs for the purpose-bought BTL
Rent, property-value, investment-return and inflation assumptions
Private Residence Relief time apportionment and the final nine months
Exit selling costs, mortgage balances and estimated CGT
Property-growth and mortgage-rate sensitivities

Outside this method

Limited-company, partnership or trust ownership
Corporation Tax and extraction tax
Mortgage eligibility, lender interest-coverage tests and product fees not entered
Consent to let, licensing, lease restrictions and landlord compliance costs not entered
Overseas residence, double-tax relief and non-resident landlord withholding
Joint-ownership income and gain allocation
Carried-forward property losses or restricted finance costs
Letting Relief except through the simplified main-residence period
A recommendation to sell, retain or buy property

Calculation

Core formulas

Net sale proceeds

Current value − selling costs − mortgage − estimated current CGT

This is the capital that can be invested or redeployed after selling the existing property.

Taxable rental profit

Collected rent − non-finance allowable costs

Mortgage interest is not deducted for a personally owned residential rental in this simplified calculation.

Finance-cost tax reduction

min(tax before credit, mortgage interest, taxable profit) × entered credit rate

The statutory reduction is subject to further adjusted-income and carry-forward rules that the lab does not reproduce.

After-tax rental cash flow

Collected rent − operating costs − mortgage payment − rental-income tax

Positive cash flow is invested; negative cash flow reduces the investment account and represents cash that must be supplied.

Incremental next-home tax

Additional-property purchase tax − main-home purchase tax

Only the extra amount caused by retaining the old property is assigned to the keep-and-let path.

Private Residence Relief fraction

Exempt period ÷ total ownership period

Entered main-residence years and, where eligible, the final nine months reduce the share of the gain exposed to CGT.

Exit wealth

Property value − selling costs − mortgage − estimated CGT + investment account

Every path is compared after a hypothetical sale at the selected horizon.

Today-money wealth

Nominal exit wealth ÷ (1 + inflation)^years

This removes the entered general inflation assumption from the final future-pound amount.

Timing convention

When cash flows occur

Acquisition, letting setup and incremental next-home tax occur at the start. Property values, rent, mortgage interest, repayments, running costs, rental-income tax and investment growth are modelled monthly. Fixed running costs rise with inflation. Each rental property is sold at the selected horizon, when selling costs, its remaining mortgage and estimated CGT are deducted.

Limitations

What the result cannot establish

Constant property, rent and investment growth conceal volatility, local divergence and sequence risk.
One marginal rental-income tax rate cannot reproduce a full tax return, personal allowance, other income, ownership shares or future band changes.
The finance-cost tax credit omits adjusted-total-income limits and the carry-forward of unused finance costs.
Private Residence Relief is a simplified time apportionment and does not model absences, nominations, partial use, gardens, business use or shared-occupancy Letting Relief.
The CGT annual exemption and rates may change before a future disposal; other gains and losses can change the amount available.
Property-purchase tax depends on ownership, relationship, residence and replacement-main-residence facts that the entered price cannot establish.
The model assumes the entered mortgage rate remains constant and settles an interest-only balance when its term ends.
A financially leading path may be unavailable or undesirable because of lending, regulation, tenancy, liquidity, concentration or personal workload.

Reference tests

Numerical checks

Case	Inputs	Expected result
Full main-residence relief	Eight years owned and eight years used as the main home; sell now	0% of the gain exposed to CGT before other facts
Former home let for ten years	Eight years owned and lived in, then ten years let	8.75 of 18 years relieved under the simplified final-nine-month method
Higher-rate landlord tax	£20,000 collected rent; £4,000 non-finance costs; £10,000 interest; 42% property-income rate; 22% credit	£4,520 modelled tax before adjusted-income limits
England additional-home cost	£500,000 next home; compare main-home and additional-property SDLT	£25,000 incremental higher-rate amount
Interest-only mortgage	£200,000 balance; 5% rate; term beyond comparison	£833.33 opening monthly interest and £200,000 capital remaining

Evidence

Sources

GOV.UK — Tax and allowable expenses when renting out property HMRC — Residential landlord finance-cost tax relief HMRC — Property-income tax rates from April 2027 GOV.UK — Private Residence Relief after letting a home GOV.UK — Work out a property gain GOV.UK — Capital Gains Tax rates and allowances GOV.UK — Residential SDLT rates Revenue Scotland — Additional Dwelling Supplement Welsh Revenue Authority — Higher residential LTT rates