Commercial Property CGT

When you sell a commercial unit, CGT is usually simpler and cheaper than on a resi BTL, but a lot of "loopholes" you see on forums (rollover, BADR) do not apply to you as a straightforward landlord.

1. CGT rates and allowances on commercial vs residential

For individuals in 2026-27:

Commercial / non-residential property (most pure commercial units):

10% on gains falling in your basic-rate band.

20% on gains above that (higher / additional rate).

Residential property:

18% basic-rate.

24% higher-rate from 6 April 2026.

Annual Exempt Amount (AEA) in 2026-27:

GBP 3,000 per individual.

You cannot carry it forward.

A couple can effectively shelter GBP 6,000 by co-owning and planning sales.

For companies:

No CGT. The gain is taxed as part of corporation tax profits at the prevailing CT rate (not covered in detail here), with different indexation rules historically.

Forum mistake: "Commercial is always 20% CGT." Reality: you still get the 10% rate within your basic-rate band and the GBP 3,000 allowance.

2. Indexation: only relevant for old corporate gains

Indexation allowance is now a historical footnote for most small landlords.

Individuals lost indexation from 6 April 2008; from that point you calculate gains simply: proceeds minus base cost minus allowable costs, with no inflation adjustment.

Companies still have indexation allowance up to December 2017 on corporate gains, frozen at that date; no indexation accrues after that.

So for your 2026-27 content:

Individual landlord selling a commercial unit held 10 years: no indexation at all.

Company selling: gains may reflect indexation for the period up to 2017 if relevant, then corporation tax on the indexed gain.

Do not overcomplicate this for landlords: in 99% of cases they are individuals or simple propcos and indexation is barely a planning tool any more.

3. Rollover Relief: why your BTL does not qualify

Rollover relief is in TCGA 1992 ss152-155.

In plain English:

If you trade, sell a qualifying business asset (used in that trade), and reinvest the proceeds in another qualifying business asset within the 12 months before to 3 years after window, you can defer the gain by rolling it into the new asset's base cost.

Qualifying assets include land and buildings occupied and used for the purposes of a trade, fixed plant and machinery, and some other business assets.

The key bit for you:

A straightforward property rental business is an investment business, not a trade, for rollover purposes.

So if you sell a let warehouse and buy another let warehouse, as an individual landlord you do not get rollover relief. You pay CGT on the gain now.

Companies running pure property investment are generally treated the same way: rental is investment, not a trade, so no rollover on bog-standard BTL / commercial lets.

The few edge cases:

A genuine trading business using the property (for example your own factory or shop that your trading company occupies) may get rollover on that building if you reinvest.

Property development companies are trading, but unsold units kept for letting muddy the water and need specialist advice.

Forum myth: "Sell one commercial, buy another within 3 years and you avoid CGT." Reality: unless you are a trader using the property in your trade, your rental company or personal portfolio does not qualify for rollover under TCGA 1992 s152.

4. Business Asset Disposal Relief (BADR): usually not for landlords

BADR (the rebranded Entrepreneurs' Relief) sits in TCGA 1992 Part V.

From 2026-27:

BADR gives a reduced 18% CGT rate (or lower where rules specify) on the first GBP 1m lifetime gains on qualifying trading business disposals.

Conditions in brief:

You are disposing of all or part of a trading business, shares in a trading company, or assets used in that business, and

You meet ownership and working time conditions for at least 2 years before disposal.

But:

HMRC and case law treat a property investment business (collecting rent from let property) as non-trading for BADR and Business Relief purposes.

That means a standard BTL portfolio or commercial rental portfolio in a company normally does not qualify.

Edge cases:

Property development companies, or businesses where property letting is clearly ancillary to a main trade, may qualify in some circumstances, but this gets very fact-specific and is not something you base a plan on without advice.

Forum myth: "Put your properties in a company and sell the shares, claim Entrepreneurs' Relief / BADR." Reality: a company whose main activity is holding property for rent is an investment company. BADR typically does not apply.

5. Mixed-use sales: splitting residential and commercial parts

Mixed-use disposals, for example shop with flat above, raise two issues:

CGT vs SDLT land-type classification:

For CGT, HMRC look at what part of the gain relates to residential vs non-residential use.

Rates:

The residential element of the gain is charged at 18% / 24%.

The commercial element at 10% / 20%.

You apportion:

The sale proceeds and base cost on a just and reasonable basis between the residential and non-residential parts (for example by relative market values of the flat and the shop).

Example structure (not full numbers here):

Mixed-use building sold for GBP 400k, flat worth GBP 200k, shop worth GBP 200k.

You compute gains on each part separately and apply the relevant rates.

Forums often assume "mixed-use means all non-residential rates". For CGT, that is wrong: HMRC will expect an apportionment, and the flat portion will be at residential rates.

6. Worked example: sell a commercial unit, 10-year hold

Scenario:

You are an individual UK landlord (not a company).

You bought a pure commercial unit (no flat) for GBP 150,000.

You are selling it 10 years later in 2026-27 for GBP 250,000.

Assume GBP 5,000 total buying / selling costs (legal, agents, SDLT ignored for CGT basis simplicity) which are allowable in the base / disposal figures.

No capital improvements and you have your full GBP 3,000 annual exemption available this year.

You are a higher-rate taxpayer (all gain falls in higher-rate band).

Step 1: Calculate the gain

Proceeds: GBP 250,000.

Less sale costs: say GBP 5,000 agents and legals → net proceeds GBP 245,000.

Less base cost: purchase price GBP 150,000 + purchase costs say GBP 5,000 → GBP 155,000.

Gain before exemptions: GBP 245,000 - 155,000 = GBP 90,000.

Step 2: Annual Exempt Amount

AEA 2026-27: GBP 3,000.

Chargeable gain: GBP 90,000 - 3,000 = GBP 87,000.

Step 3: Apply rate

Commercial property, higher-rate band: 20% CGT.

CGT bill: GBP 87,000 x 20% = GBP 17,400.

So your after-tax profit vs original cost:

Gross gain: GBP 100,000 (250k - 150k).

CGT: GBP 17,400.

Net after-tax gain: GBP 82,600 (plus you have had rental income along the way).

If it had been a residential BTL instead, same numbers and higher-rate band, the CGT rate would be 24% from 6 April 2026, so the same GBP 87,000 chargeable gain would give a GBP 20,880 tax bill instead of GBP 17,400.

7. What forums get wrong on commercial property CGT

The same myths come up repeatedly:

"I can roll the gain into my next commercial property."

No, not if you are just a landlord.

TCGA 1992 s152 rollover applies to assets used in a trade, not an investment property business. Letting alone is not a trade.

"Put it in a company and sell the shares with BADR at a lower rate."

A company whose main business is letting property is usually an investment company, not a trading company, so it does not qualify for BADR.

"Mixed-use means all non-residential CGT rates."

HMRC will expect apportionment; the residential portion of a mixed-use gain still attracts residential rates.

"Indexation will reduce my gain."

For you as an individual landlord in 2026-27, indexation is dead. You work with nominal numbers only; only old corporate gains up to 2017 still use indexation at all.

For PropertyKiln, the line to take is:

If you are a normal landlord selling a normal commercial unit, assume 10% / 20% CGT, no rollover, no BADR, no indexation, GBP 3,000 allowance, and then show the maths. If some relief might apply (trading use, development trade, share sale of a trading company), you flag it as "specialist advice needed", not a DIY loophole.

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