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 your sale price exceeds your purchase price, after deducting certain costs. But don’t worry. Not every property sale faces taxation, as several important exemptions exist.

CGT usually comes into play in specific scenarios. These include inheriting a property, selling a second home, offloading a buy-to-let investment, or parting with a property that was not your main home for your entire period of ownership.

To calculate your financial gain, you subtract your original purchase price from the final sale price. You can also deduct various expenses. These include estate agent fees, legal fees, and money spent on major property improvements. However, day-to-day repairs and routine decorating generally do not qualify.

Your Annual CGT Allowance

Everyone receives an annual CGT allowance. If your total gain falls below that threshold, you will owe zero tax. If your profit exceeds the allowance, the tax rate depends on your overall income. Furthermore, residential property attracts higher tax rates than other assets.

Private Residence Relief represents one of the most common exemptions. If a property served as your main home for your entire ownership period, you usually pay no CGT. Even if it was your main home for only part of that time, you might still qualify for partial relief. This is especially true if you lived away for certain permitted periods.

Additionally, owners of UK residential property must report and pay CGT within 60 days of completion. Tax rules can feel complex and overwhelming. Therefore, seeking professional advice ensures you claim every relief to which you are legally entitled. While HMRC provides public guidance, an expert can streamline the entire process.

To find out more about CGT contact us today at enquiries@fsmsolicitors.co.uk