A question that is frequently asked when it comes to the sale of a property is ‘Will I have to pay Capital Gains Tax?’

The answer to this question depends on several factors – it is vital to get tax advice to avoid any unexpected tax liabilities; penalties for non-compliance or late reporting; and interest for late payment.

Capital Gains Tax (CGT) is a tax that is payable when you sell or gift certain assets that have increased in value since they were purchased. This tax can be due, for example, on the sale of buy-to-lets; inherited property; and commercial property, but can also include your home.

If you have sold a property that is your home, usually no CGT is due – as a result of an automatic tax relief called Private Residence Relief.

However, this relief does not always apply for the full gain on selling a property, so CGT can still be payable. For example, CGT can still be payable if any of the following applies:

  • You have not lived in your home during the whole period of your ownership;
  • You have let part of it out to a tenant (this does not include lodgers who share living space with you);
  • You have had more than one home/residence during the period of ownership;
  • You have used part of your home exclusively for business purposes; and
  • The grounds (including all buildings) are more than 0.5 hectares (just over an acre) in total.

When do I pay CGT and how much?

You must report and pay any CGT due on the disposal of residential property within 60 days.

From 6  April 2024, the rate of CGT for higher or additional rate taxpayers will be cut from 28% to 24%. The lower rate of CGT will remain at 18% on gains made when selling a property for basic-rate taxpayers.

CGT is only due on gains if your total gains for the tax year exceed your annual allowance – this is currently £6,000 per person in 2023-24 and £3,000 per person in the tax year 2024-25. Couples who jointly own assets can each use this allowance against their share of the gain.

When determining which tax bracket you are in, you take into account your taxable income for the tax year as well as the capital gain, so this could push you into paying some tax at 24%/28% despite normally being a basic rate taxpayer.

How we can help

The regulations around CGT can be misinterpreted, so if there is any doubt about whether CGT is due, it is advisable to seek professional guidance.

Our team of experts are able to advise on CGT when selling residential property, including if it applies to your specific circumstances; the amount of CGT due; any tax reliefs you are entitled to; and reporting the capital gain in the 60-day report to HMRC.

Written by

Mary-Anne Sargeant

Mary-Anne Sargeant has been the Partner of our Attleborough office since 2010. Mary-Anne and her team provide professional accountancy and tax advice for a broad spectrum of clients, from brand new start-ups to well established family and owner managed businesses and from private individuals to companies.

Find out more about our Attleborough office here.