Changes to Capital Gains Tax when selling Property

You will incur capital gains tax (CGT) when you dispose of property. The one exception to this is when you are selling your main residence. You may want to read about Tax Relief for Homeowners to find out more about Private Residence Relief and Lettings Relief and how it affects your CGT liability. In all other situations such as selling a holiday home, second home or buy-to-let property, capital gains tax will need to be paid where you make a profit. However, since April 2020 there have been changes to capital gains tax so find out how you’re impacted below.

How to pay your CGT

It is your responsibility to calculate your CGT bill, declare it and pay it. At the moment, this is done via your self-assessment tax return so although you can do this as soon as your property is sold, the official deadline you must adhere to is the personal tax return deadline of 31 January.

CGT Rates on Property

CGT applies to gains made on disposals of various other assets too, but there is a higher rate of CGT on the sale of property specifically. For those that fall in the basic rate income tax bracket the rate is 18%, whilst those in the higher and additional income tax band need to pay 24%. Be sure to pay attention to whether the sale of the property will push you into a higher tax bracket as this will have to be accounted for in your CGT calculation.

CGT Allowance

The other thing to bear in mind is your annual CGT allowance. Every tax payer is entitled to an annual allowance that is tax free. For the tax year 2024/25 the allowance has been reduced by half to £3,000 from £6,000. Nevertheless. be sure to deduct this from your gain when calculating your tax bill. You are unable to carry this allowance forwards so if you do not use it one year, the allowance is gone.

How to reduce your CGT

You can minimise your CGT bill by deducting legitimate costs. Be sure to save all supporting documents in order to claim for these against your gain:

• Solicitor fees
• Estate agent fees
• Stamp duty when the property was bought
• Costs involved to improve the asset such as paying for an extension (however you are not allowed to deduct costs for maintenance of the property)

Changes to capital gains tax

Since April 2020, a new CGT return will need to be made for the sale of every property, which holds a 30 day deadline to be submitted from the date of sale completion and includes payment to be made within the same timeframe. Where the rule will not apply is when the disposal of the property is eligible for full private residence relief, is covered by the annual exemption (CGT tax-free allowance), or unused losses. You will also not have to submit a CGT return where you sell a foreign residential property that is covered by a CGT double taxation agreement.

For non-UK residents, the rules have been extended. Previously you would have only been obliged to report and pay for CGT on residential property within 30 days but since April 2020, you are required to do so for all types of property including non-residential.