Capital gains tax on selling property in the UK can be a significant expense for homeowners and investors. This tax applies to the profit made when selling a property that’s not your main residence.
What is capital gains tax on selling property in the UK?
Capital gains tax (CGT) is a tax on the profit you make when you sell a property that’s not your main home. It’s calculated based on the difference between what you paid for the property and what you sell it for, minus any allowable expenses. How much CGT you’ll pay depends on your income tax band:
- Basic rate taxpayers pay 18% on residential property gains
- Higher and additional rate taxpayers pay 28% on residential property gains
Do I have to pay CGT on my main home?
You don’t usually have to pay CGT when you sell your main home, thanks to Private Residence Relief. However, there are some exceptions:
- If you’ve used part of your home exclusively for business
- If you’ve let out part of your home
- If your home includes a lot of land (more than 5,000 square metres).
How is CGT calculated on property?
To work out your CGT bill:
- Calculate your gain (selling price minus purchase price)
- Subtract your CGT allowance (£3,000 for 2024/25)
- Deduct any allowable expenses
- Apply the relevant tax rate to the remaining amount
What expenses can I deduct from my CGT bill?
You can reduce your CGT bill by deducting certain costs:
- Stamp duty paid when buying the property
- Estate agent and solicitor fees
- Costs of improvement works (not regular maintenance)
When do I need to pay CGT?
You must report and pay any CGT on UK property sales within 60 days of the completion date. This is done through the ‘Capital Gains Tax on UK property’ service on the GOV.UK website.
Can I reduce my CGT bill?
There are several ways to potentially lower your CGT liability:
- Use your annual CGT allowance (£3,000 for 2024/25)
- Offset losses from previous years
- Transfer assets to your spouse or civil partner
- Claim Private Residence Relief if you’ve lived in the property
What about CGT for non-UK residents?
Non-UK residents must pay CGT on gains from selling UK property. The rules are slightly different:
- You only pay CGT on gains made since April 2015 for residential property
- You must report the sale within 60 days, even if there’s no tax to pay
How does CGT work for inherited property?
If you inherit a property:
- You don’t pay CGT when you inherit, but you might when you sell
- The CGT is based on the increase in value since the person died
- You might be able to claim Private Residence Relief if you’ve lived there
Here’s a simple table showing CGT rates for 2024/25:
| Tax Band | CGT Rate (Residential Property) |
|---|---|
| Basic Rate | 18% |
| Higher/Additional Rate | 24% |
Remember, these rates apply to the gain after deducting your tax-free allowance and any allowable expenses.CGT can be tricky, so it’s often wise to seek professional advice, especially for complex situations or high-value properties.
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