Do you owe Capital Gains Tax on your property sale?

With the regulations surrounding Capital Gains Tax and property sales constantly shifting, many homeowners and their advisers may not realise that they owe tax on the disposal of a property.

When a home is sold, there is usually no CGT due, but tax may be owed in some cases on the gains you have made.

Higher and additional rate taxpayers pay CGT on property at a rate of 28 per cent.

The situation is more complicated for basic rate taxpayers, who pay at a rate of 18 per cent on gains where their taxable gains, less their tax-free allowance, but plus their taxable income, are still within the basic rate tax band.

Any amount that takes their combined taxable income and taxable gains above the higher rate threshold of £50,271 will be charged at 28 per cent.

Who does this affect?

You will be impacted if you own a property other than your main residence, including:

  • Let properties
  • Second or holiday homes

You can also be impacted upon the sale of your main residence in circumstances where:

  • You have let it out in the past
  • You have used it for business
  • It is especially large

It’s important to note that you only have to pay CGT on gains that exceed your annual allowance (the current tax-free allowance is £12,300 per person).

If you are the only owner of a property, sharing ownership with your spouse will double your allowance on a future sale.

Any Capital Gains Tax (CGT) due on UK residential property disposals made by UK residents must be reported and paid within 60 days of completion.

How can CGT be reported? 

When reporting a sale of a UK residential property to HM Revenue & Customs (HMRC), you may be required to create a Capital Gains Tax on UK property account, which we can help with.

This will permit you to:

  • Report the disposal of UK residential property or land
  • Pay any tax owed for that disposal
  • View previous and current returns.

Although there are some exemptions from completing a return, the deadline gives limited time to retrieve supporting documentation, prepare CGT calculations or obtain valuations if needed.

Non-UK residents must also report all sales or disposals of UK property (residential and non-residential) within 60 days. This is still the case if there is no tax to pay or they have made a loss.

Take action now

It is easy to overlook these requirements, but you must report the relevant information to HMRC within this new time frame and any tax paid to avoid penalties.

The new rules surrounding CGT on property sales are complex, so it is worth seeking advice if you are unsure of how this affects you.

Concerned about property tax? Contact us.