Capital gains tax on property

Jul 28, 2023 | Business, Tax

When selling a property, you may find that you incur a capital gains tax bill, payable to HMRC.

While this is not always the case, it is best to understand the why, how, and when of it all – saving yourself from potential penalties as a result of any missed payments or undeclared earnings.

This article will tell you everything you need to know about capital gains tax on property.


What is capital gains tax?

Capital gains tax (CGT) is a chargeable rate on the sale of any high-value assets or property.

If you dispose of a property that is not your main home (more on this later), you will pay a percentage of any profit, or ‘gain’, you make from the sale.

Capital gains tax on residential property is currently 18% or 28%, depending on your income tax band.


CGT on property

As we have already mentioned, there are different CGT rules depending on the type of property you are selling.

If you are looking to sell your main residence, you will not usually need to pay any CGT on the amount you receive. The only times when this may change is if:

  • the home includes 5,000 square metres or more
  • you have sublet part of the home
  • you use part of your home exclusively for business purposes
  • you bought it for the sole reason of making a gain.

However, if you are selling a residential property that is not your main home, you will have to pay a CGT bill to HMRC. The same applies if you own a buy-to-let property.


How much will I pay?

Your CGT bill will be heavily reliant on how much you earn as an individual. If you are a basic rate taxpayer, you will only pay 18% on the gain, while higher and additional rate earners will pay the full 28%.

That said, everyone gets an annual CGT tax allowance, meaning a certain amount of the profit will be tax-free.

For the 2023/24 tax year, the CGT allowance is £6,000. For example, if you sell a property this year and make a profit of £15,000 (being a basic rate taxpayer) you would pay nothing on the first £6,000. This means you would pay £1,620 at 18% of the remaining £9,000.

There are several other reliefs you may be entitled to depending on further circumstances, which can be found on the Government website. Alternatively, you could always ask your accountant.


Reporting your gains

On the sale of most properties in the UK, you will have 60 days from the point of sale to let HMRC know. You can do this online using your Government Gateway account, or include it in your self-assessment tax return. After that you can then pay HMRC in a number of ways, including:

  • BACS
  • online or telephone banking
  • by cheque
  • credit or debit card.


Take action

If you are currently going through the process of selling a property or getting close to completion, you know your CGT bill will be around the corner.

Whatever stage you are at, it is best to get in touch with an expert accountant who can take care of the reporting on your behalf. This means you can relax and enjoy your gains, stress-free.

If you need help with your capital gains tax bill, contact a member of our team.

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