A Guide to Capital Gains Tax on UK Property
You must file and pay Capital Gains Tax (CGT) on the sale of a UK property within 60 days after the property is sold. Penalties apply if this report is late. Partner NEIL MOON explains all you need to know.
Capital Gains Tax (CGT) is the tax that applies if you sell an asset such as a second property and the value has increased. For example, if you bought a property for £200,000 and sell it for £280,000, there would usually be a Capital Gains Tax to pay on the £80,000 profit (the gain).
CGT is not applicable for properties that are your primary residence, but it is payable on a buy-to-let or holiday home. There are some deductibles that can be applied to reduce the amount of CGT that is payable.
How much Capital Gains Tax do I need to pay?
The rate of CGT will depend on your income tax rate and there is a £12,300 allowance for profit before you will need to make any CGT payment. If you share ownership of the property with a spouse, you both qualify for the allowance, so it would double to £24,600. Therefore, you would pay no Capital Gains Tax on the first £24,600 of your profit.
For basic rate taxpayers, the CGT rate is 18% on residential property gains and 10% on all other assets.
For higher rate taxpayers, the CGT rate is 28% on residential property gains and 20% on all other assets.
Are there any exemptions for paying CGT?
Properties that are given to a spouse, civil partner or charity are exempt from CGT. If you inherit a property from another type of relative, you will still be required to pay CGT.
Non-UK residents must comply with the Non-Resident Capital Gains tax rules when selling a UK property, which includes reporting the sale even if there is no CGT to pay. Any CGT must be paid within 60 days of the completion date.
What deductibles can be applied to reduce my Capital Gains Tax?
The following deductibles can be applied to reduce your CGT bill:
- Estate agent fees for both buying and selling the property
- Solicitors' fees for both buying and selling the property
- Stamp duty paid when purchasing the property
- Certain home improvement costs that increased property value, such as an extension
You may also be able to offset any losses that you have made when you have sold other assets.
When is CGT due to be paid?
By law you must report and pay any Capital Gains Tax within 60 days of the property sale completion date. Failure to report and make the payment can result in a fine and interest charges.
To pay your CGT, you must calculate your payable amount and complete a tax return.
Benefits of using a Capital Gains Tax service
Calculating your payable CGT amount can be complicated, and if you are not aware of all the deductibles you may be entitled to, you could end up paying more tax than is necessary. An expert CGT service will accurately calculate your payable amount, ensuring that all possible deductibles are applied to minimise the amount you need to pay.
You may even be advised of other tax efficient solutions that can reduce your tax bill or deem that you are not required to pay any CGT, depending on your financial circumstances.
How Page Kirk can help you
As chartered tax advisors, we can offer a full-service, including:
- Calculating how much CGT you need to pay.
- Reporting it to HMRC on your behalf.
- Dealing with any investigations from HMRC. These are covered by Tax Investigation Insurance, which ensures that you avoid any additional fees if an investigation occurs.
We calculate your Capital Gains Tax bill by:
- Fully evaluating your income, asset value and circumstances.
- Applying all available tax deductions (such as professional fees).
- Assessing your eligibility for a range of reliefs and exemptions.
- Reviewing previous losses to offset against your CGT bill.
- Advising on asset ownership solutions to maximise relief within a family.
- Reviewing the use of pensions or trusts in reducing CGT.
Find out more about the service we offer by clicking here. For more information on how we can help you, please contact us on 0115 955 5500 or email enquiries@pagekirk.co.uk