Capital Gains Tax - Selling UK Property – UK Tax Resident

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Tax When You Sell Property

You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell (or ‘dispose of’) property that was not your home or former main residence such as:

  • buy-to-let/investment properties
  • business premises
  • land
  • inherited property

Different rules apply if you:

  • sell your home
  • live abroad
  • are a company registered abroad

When You Do Not Pay

  • Gifts to your husband, wife, civil partner or a charity are generally exempt from CGT.
  • You may qualify for tax relief if the property is/was a business asset.
  • If the property was occupied by a dependent relative, you may not have to pay.

If You Need To Pay

If You Sold A Property In The UK On Or After 6 April 2020

You must report and pay any Capital Gains Tax due on UK residential property within:

  • 60 days of selling the property if the completion date was on or after 27 October 2021
  • 30 days of selling the property if the completion date was between 6 April 2020 and 26 October 2021

You may have to pay interest and a penalty if you do not report and pay on time.

If you sold a residential property before 6 April 2020, you must report your gains in a Self Assessment tax return for the tax year following the sale.

Reliefs Available To Offset Capital Gains Tax

Private Residence Relief

Private residence relief is a tax relief available that allows individuals to reduce or eliminate the capital gains tax they would otherwise be required to pay when they sell their primary residence.

The relief is intended to help individuals who have made a profit on the sale of their home, as they may be able to avoid paying tax on that profit.

To qualify for private residence relief, an individual must meet certain criteria, including:

  1. The property must have been their main residence at some point during the period of ownership.
  2. The individual must have lived in the property for at least part of the tax year in which the sale takes place.
  3. The individual must not have claimed private residence relief on any other property in the same tax year.

If an individual meets these criteria, they may be able to claim private residence relief on the sale of their primary residence. The relief is usually calculated as the period of time that the individual lived in the property as their main residence, divided by the total period of ownership.

This calculation determines the proportion of the gain that is eligible for relief, which can then be applied to reduce or eliminate the capital gains tax due on the sale.

An extra exemption period is granted for the last 9 months of ownership regardless of whether you actually lived in the property at this time.

Nominating A Home

When you own more than one property that qualifies for the main residency exemption you can nominate one property that you wish to apply the exemption and you must do so by writing to HMRC this within 2 years every time your combination of home changes

Lettings Relief

Lettings relief was a tax relief that allows individuals to reduce the amount of capital gains tax they would otherwise be required to pay on the sale of a property that has been rented out at some point during their period of ownership.

The relief was restricted from April 2020 and will only apply where the owner is sharing occupancy of the home with the tenant.

To claim lettings relief on the sale of the property. The relief is calculated as the lesser of:

  1. The amount of private residence relief that the individual is entitled to claim on the sale of the property, or
  2. The amount of capital gains tax that would be due on the sale if the property had not been rented out, minus the amount of capital gains tax that is actually due on the sale.

Lettings relief is limited to £40,000 per individual, and it is only available if an individual has not claimed private residence relief on any other property in the same tax year.

A Note On Reliefs

To qualify and apply any of the CGT reliefs that may be available to you it is recommended to seek the advice of a tax professional when considering the sale of a property.

Other CGT Reliefs Available When Selling Assets

Business Asset Disposal Relief

Business asset disposal relief, also known as Entrepreneurs’ Relief, is a tax relief that allows individuals to pay a reduced rate of capital gains tax when they dispose of certain business assets.

To qualify for business asset disposal relief, an individual must meet certain criteria, including:

  1. The asset must have been owned for at least two years before the sale.
  2. The individual must have been a director or employee of the business, or have held at least a 5% stake in the business, for at least one year leading up to the sale.
  3. The asset must have been used in the business, or must have been held as an investment in the business, during the period of ownership.

The relief allows individuals to pay a reduced rate of capital gains tax of 10% on the first £1 million of qualifying gains. Gains above this amount are taxed at the standard rate of 20%.

CGT Exemption

Individuals currently have a capital gains tax exemption of £12,300, this amount is reducing to £6,000 from 6th April 2023 and £3,000 from 6th April 2024 and subsequent years.

If the total of all gains fall within this exemption, then no tax is payable.

Capital Gains Tax Returns & Advice For Landlords And Property Investors

GM Tax & Accounting provides specialist CGT advice to landlords and property investors. There are many factors that can be considered by landlords and investors for minimizing tax burdens and improving your tax position, our specialised team can help navigate the complexities of selling a UK property.

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