If you sell a property in the UK and make a profit, you might need to pay Capital Gains Tax (CGT). This tax applies when the amount you sell the property for is higher than what you paid for it after certain costs are taken into account. But don’t worry, not every property sale is taxed as there are some important exemptions.

CGT usually comes into play when you inherit a property, sell a second home, a buy to let property or a property that hasn’t been your main home for the entire time you’ve owned it. To work out the gain, you subtract the price you originally paid for the property from the sale price and you can also deduct some costs like estate agent fees, legal fees, and money spent on major improvements. Day to day repairs or decorating usually don’t count.

Everyone has an annual CGT allowance, so if your gain is below that amount, you won’t pay any tax. If it’s above the allowance, the tax you pay depends on your income, with higher rates for residential property.

One of the most common exemptions is Private Residence Relief. If the property has been your main home for the whole time you’ve owned it you usually won’t have to pay CGT. Even if it’s only been your main home for part of the time, you may still get some relief, especially if you’ve been away for certain periods.

It’s also worth noting that for UK residential property CGT usually needs to be reported and paid within 60 days of the sale. The rules can feel complicated, so it’s often a good idea to get advice to make sure you’re claiming any reliefs you’re entitled to. Guidance is available from HMRC but a professional can help make it all much simpler.

To find out more about CGT, contact our friendly Wills, Trusts and Probate Team on enquiries@fsmsolicitors.co.uk