Should You Sell or Let Your Property?
The complete guide to making one of your biggest financial decisions
Let's break down what really matters (spoiler: it's not just whether house prices go up).
🏠 vs 📈 The Fundamental Trade-Off
When you sell your property, you unlock equity that can be invested in stocks, bonds, or other assets. When you let it, you're betting the property market (plus rental income) will outperform your other investment options.
It's not just about which asset class performs better—it's about which option gives you better risk-adjusted returns after taxes and costs.
Keeping the Property
- Benefit from property appreciation
- Generate rental income
- Tangible asset you can see
- Potential for leveraged returns
But...
- Maintenance and management hassle
- Concentrated risk (all eggs, one basket)
- Low liquidity—can't sell part of it
- Void periods and problem tenants
Selling & Investing
- Instant diversification across markets
- High liquidity—sell anytime
- No tenant headaches or repairs
- Lower ongoing costs
But...
- Miss out on property appreciation
- Pay selling costs and potentially CGT
- Stock market volatility
- No leverage (unless using margin)
Key Insight: It's All About Opportunity Cost
Every pound tied up in property equity is a pound that could be growing elsewhere. The question isn't "will my property appreciate?"—it's "will it appreciate more than my next best option, after accounting for all costs and taxes?"
📊 Key Forces That Impact Your Decision
Four main factors drive whether selling or letting comes out ahead:
Property Appreciation
UK house prices have historically grown 3-5% per year on average, but this varies hugely by region and time period.
- London: Often higher, but recently cooling
- Regional cities: Variable, some outperforming London
- Past performance ≠ future results
Stock Market Returns
Global stock markets (e.g., a diversified index fund) have returned about 7-8% annually over the long term, while the UK's FTSE 100 has sometimes lagged, achieving around 4-6.5%.
- More volatile year-to-year
- Highly liquid and diversified
- Lower costs than property
- Global diversification typically beats UK-only
Rental Yield
Rental income as a percentage of property value varies by location and property type.
- London: Often 3-4% (lower yields)
- North England: Can be 5-6%+ (higher yields)
- Remember: gross ≠ net (costs eat into this)
Mortgage Rates
Interest rates dramatically affect letting profitability, especially after Section 24 changes.
- Higher rates = less cash flow
- Can't fully deduct interest anymore (see tax section)
- Fixed vs. variable rate decisions matter
Don't Rely on Historical Averages Alone
Just because UK property has averaged 4% growth doesn't mean your property will. And just because stocks averaged 7% doesn't guarantee future returns. Use our calculator to model different scenarios—optimistic, pessimistic, and realistic.
🧾 Understanding UK Tax Implications
This is where many people get it wrong. UK tax rules significantly affect whether selling or letting is better.
Capital Gains Tax (CGT) When Selling
How CGT Works:
- You pay tax on the gain (sale price minus purchase price and improvements)
- Annual CGT allowance: £3,000 (2024/25) - only gains above this are taxed. Note: this was £12,300 just a few years ago, making CGT increasingly important in your decision.
- BUT: If it was your main home throughout ownership, you pay £0 in CGT thanks to Private Residence Relief
- If you lived there for part of the time, you get partial relief
Private Residence Relief is Powerful
If you've lived in the property as your main home for the entire period you owned it, you pay zero CGT when you sell. This can save you tens of thousands of pounds.
Even if you let it out later, you still get relief for the period you lived there (plus the final 9 months of ownership).
Rental Income Tax
Rental income is added to your other income and taxed at your marginal rate:
What Counts as Rental Profit?
Rental income minus allowable expenses:
- ✅ Maintenance and repairs
- ✅ Property management fees
- ✅ Insurance
- ✅ Service charges
- ✅ Letting agent fees
- ❌ Mortgage capital repayments (not deductible)
- ⚠️ Mortgage interest (special rules - see below)
Section 24: The Tax Change That Hurt Landlords
Before 2020, landlords could deduct mortgage interest from rental income before calculating tax.
Now: You can't deduct interest. Instead, you get a 20% tax credit on the interest paid. The credit is applied to the lower of: (1) your finance costs, (2) your property profits, or (3) your adjusted total income.
Before Section 24 (Pre-2020)
Rental income: £15,000
Minus interest: -£8,000
Minus expenses: -£2,000
Taxable profit: £5,000
Tax (40%): £2,000
After Section 24 (Now)
Rental income: £15,000
Minus expenses: -£2,000
Taxable profit: £13,000
Tax (40%): £5,200
Minus 20% credit*: -£1,600
Net tax: £3,600
*20% × £8,000 interest (the lowest of finance costs, profits, or income in this example)
That's £1,600 more in tax on the same rental income! For higher-rate taxpayers, Section 24 can make the difference between profit and loss.
🧮 Worked Example: Three Scenarios
Let's look at three real-world scenarios to see when each option wins.
Scenario 1: Selling Wins
The Situation:
- London flat worth £400,000
- Bought for £300,000 (5 years ago)
- Outstanding mortgage: £200,000 at 4.5%
- Expected rent: £1,800/month (4.5% gross yield)
- Owner is a 40% taxpayer
- Primary residence (no CGT)
The Math (10-year horizon):
💼 Selling
Sale price: £400,000
Minus mortgage: -£200,000
Minus selling costs: -£10,000
CGT: £0 (primary residence)
Net proceeds: £190,000
Invested at 7%/year for 10 years:
£373,700
🏠 Letting
Monthly rent: £1,800
Minus mortgage: -£900
Minus expenses: -£500
Minus tax: -£300
Monthly cash flow: £100
After 10 years:
Property value: £542,000
Remaining mortgage: £150,000
Reinvested cash: £19,000
Minus CGT on sale: -£35,000
£376,000
Scenario 2: Letting Wins
The Situation:
- Manchester house worth £250,000
- Bought for £180,000 (3 years ago)
- Outstanding mortgage: £100,000 at 3.5%
- Expected rent: £1,400/month (6.7% gross yield)
- Owner is a 20% taxpayer
- Was rental property from purchase (will pay CGT)
The Math (10-year horizon):
💼 Selling
Sale price: £250,000
Minus mortgage: -£100,000
Minus selling costs: -£6,000
Minus CGT: -£11,000
Net proceeds: £133,000
Invested at 7%/year for 10 years:
£261,500
🏠 Letting
Monthly rent: £1,400
Minus mortgage: -£400
Minus expenses: -£350
Minus tax: -£150
Monthly cash flow: £500
After 10 years:
Property value: £339,000
Remaining mortgage: £70,000
Reinvested cash: £103,000
Minus CGT on sale: -£18,000
£354,000
Scenario 3: It's Close
The Situation:
- Bristol flat worth £320,000
- Bought for £280,000 (2 years ago)
- Outstanding mortgage: £150,000 at 4%
- Expected rent: £1,500/month (5.6% gross yield)
- Owner is a 40% taxpayer
- Lived in for 1 year, then moved (partial CGT relief)
Want to Run Your Own Numbers?
Every situation is different. Use our calculator to model your specific property, mortgage, tax situation, and assumptions about future returns.
Try the Calculator💭 Common Misconceptions
"Rental income is passive income"
Being a landlord is work. Late-night emergency calls, tenant disputes, property viewings, compliance checks, repairs coordination. Many landlords report spending 5-10 hours per month managing their property—even with a letting agent.
"Property always goes up"
UK house prices fell 20% from 2007-2009. Some regions took 5+ years to recover. While property has been a good long-term bet historically, it's not guaranteed—especially over shorter periods.
"You can't lose with bricks and mortar"
Property concentration risk is real. All your wealth in one illiquid asset, in one location, in one sector. If that area declines or your specific building has issues (cladding scandal, anyone?), you're stuck. Diversification reduces risk.
"Stocks are too risky"
Over long periods (10+ years), diversified stock portfolios have been less risky than individual properties. Yes, stocks are volatile short-term, but property has hidden volatility—you just don't see a daily price ticker.
"I'll get a mortgage for leverage"
Leverage cuts both ways. Yes, a 75% LTV mortgage gives you 4x leverage on gains. But it also amplifies losses, reduces cash flow (interest payments), and adds risk. After Section 24, highly leveraged buy-to-lets often lose money for higher-rate taxpayers.
"I don't trust the stock market"
When you invest in a global index fund, you own tiny pieces of thousands of companies across the world. You're not "gambling"—you're betting on global economic growth. Meanwhile, one property is a bet on one specific location and building.
❤️ Factors Beyond the Numbers
Sometimes the "right" financial answer isn't the right overall answer for you. Here are factors to consider beyond the spreadsheet:
Stress & Mental Health
Do you lose sleep worrying about tenants trashing your place? Does the thought of emergency repairs stress you out? Mental health has value too. If being a landlord causes anxiety, selling might be worth a financial "loss."
Time & Opportunity Cost
Time spent managing a property is time not spent with family, on hobbies, or earning money elsewhere. If you're a high earner, your time might be worth more than the marginal gains from letting.
Career Flexibility
Need to move cities for a job? Emigrate? Having property ties you down. Selling gives you geographic flexibility and fewer logistical headaches if your life changes.
Other Financial Goals
Maybe you need the capital for a business, education, or to pay off higher-interest debt. Sometimes unlocking equity serves a more important purpose than maximizing investment returns.
Age & Timeline
Younger? You have time to ride out market volatility. Nearing retirement? You might prefer the stability and income of a paid-off rental, or the simplicity of a stock portfolio. Your timeline matters.
Emotional Attachment
Was it your first home? Where your kids grew up? Full of memories? That emotional value is real, even if it doesn't show up in a calculation. Sometimes keeping it is worth the financial trade-off.
The Best Decision is the One That's Right for You
Our calculator shows you the numbers. But you're the only one who knows your risk tolerance, stress levels, time constraints, and life goals. Use the financial analysis as one input—not the only input—in your decision.
Ready to See Your Numbers?
Now that you understand the key factors, run your specific situation through our calculator to see whether selling or letting makes more financial sense for you.
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