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Capital Gains Tax
on Property
CGT on Sale of Property
Profits from the sale of property in the United Kingdom (UK) may be subject to Capital Gains Tax on Property. When selling your primary residence, you often won’t have to pay this tax. Contact us to take advantage of available tax relief and lower your tax bill.
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Capital Gains Tax on Property
The profit you make from the sale of property and associated assets are subject to a tax known as the Capital Gains Tax on Property. The amount of tax that must be paid on gains made from the sale of other assets is often lower than the capital gains tax that becomes due on profits made from the sale of property investment. Capital gains tax is a tax that only comes into play when you sell a property that isn’t your primary residence, and the rates vary depending on which tax band you fall into.
When selling a property, will you be subject to capital gains tax? To answer your question in a nutshell: it depends. If the value of the rental property you hold as a landlord appreciates while you hold it, you will have to pay capital gains tax (CGT) when you sell. If you’re considering making a big move and selling more than one property, you would need to plan and estimate how much your final CGT payment will probably be. We specialise in planning CGT for landlords who invest in buy-to-let properties and advise on potential strategies to lower the final tax bill.
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You have 30 days from the completion date to notify HMRC and pay CGT if you sold a rental but to let property between April 6th, 2020 and October 27th, 2021. Any transactions finalised after October 27th, 2021, require payment within 60 days. It is critical that you stay on top of this subject since it is possible that you may be imposed a penalty fee in addition to interest charges if you do not declare the transaction and pay your tax on time.
The CGT rates for the property are higher than for other assets, which are currently 20% and 10%, depending on your tax band. Capital Gains Tax on the property will depend on your income, whether you are a basic or higher rate taxpayer. Currently, basic rate taxpayers pay Capital Gain Tax on property at 18%, and higher tax rate payers are charged 28%. Businesses and Trustees of trusts will pay 28% CGT.
When selling a buy-to-let or rental property, you need to pay attention to the following factors, which can bring down your tax liability down.
Offset Your Losses: whether you make a gain or not, still report your losses on your tax return and carry forward to claim against any possible future gains.
Use Your Spouse’s Allowance: You can reduce CGT by including your spouse’s name in the ownership of property.
Time Your Sale: You can plan to defer the sale to next year if you have already used your capital gains tax allowances this year. You can also plan to reduce your income in order to take advantage of the lower percentage of tax payable for basic rate taxpayers.
Nominate Your Primary Home Location Wisely: If you own more than one property, you get to choose which one is exempt from CGT; it does not have to be the one where you spend the most of your time in order to qualify. Nominate the property that, in your assessment, will make you the maximum profit when the time comes to sell it. After purchasing a new house, you have two years to nominate that property as your primary residence.
Private Residence Relief: If you have lived in the property before renting it out, you can claim Private Residence Relief.
Lettings Relief: If you lived on the property at the same time as your tenants, you could claim Letting Relief in order to reduce your capital gains tax bill.
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