Capital Gains rates and rules
If you pay basic rate Income Tax
If you’re a basic rate
taxpayer, the rate you pay depends on the size of your gain, your taxable
income and whether your gain is from residential property or other assets.
Capital Gains Tax on UK Residential Property
You do not pay CGT if you are selling your main residence, however any other properties you
own could be subject to CGT if you have made a gain. Examples of these properties
include buy to let, business premises, land and property that you have inherited.
In most cases, you won't need to pay CGT when selling the property you live in,
because you will be entitled to 'private residence relief'.
You won't need to pay CGT for the time a property was your main residence, plus the
past nine months of ownership (even if you weren't living in the property during
those nine months).
You pay a different rate of tax on gains from residential property than you do on other
assets. Basic-rate taxpayers pay 18% on gains they make when selling property, while
higher and
additional-rate taxpayers pay 28%.
How much capital gains tax do you pay on property?
If you sell a property in the UK, you might need to pay capital gains tax (CGT) on the
profits you make.
You generally won't need to pay the tax when selling your main residence.
If you are selling a buy-to-let property or second home, you may face a Capital Gains Tax
bill. .
You may need to pay CGT if your home is partly used as a business premises, or if you
lease out part of your property. You may get tax relief if you sold a property that used
to
be your main home.
What can I deduct from my taxable gain on property?
Certain costs can be deduced from your gain when buying and selling a property. These
include:
- solicitor and estate agent fees
- stamp duty when buying the property.
Costs involved with improving the property, such as building an extension, can also be
considered when working out your taxable gain.
However, you cannot deduct costs involved with the upkeep of a property and you cannot
deduct mortgage interest from the gain either.
Capital Gains advice for landlords and property investors
If you’re a landlord, part of your process of planning investments and your next property
purchase may involve assessing the potential for capital gains.
Landlords who invest in property to take advantage of property market price growth will
almost certainly face a Capital Gains Tax bill now or in the future.
Capital Gains on inherited properties
if the home you’ve inherited has gone up in value since you inherited it, you may have to
pay Capital Gains Tax if and when you decide to sell it.
The only ways to avoid paying Capital Gains Tax on an inherited property are:
- Make the inherited property your principal residence
- Sell or gift the property as soon as you inherit it
To find out more read here.
Capital Gains Tax on overseas properties
Generally, if you are resident in the UK, you are liable to pay Capital Gains Tax (CGT)
when you
sell (or dispose of) an overseas property at a gain.
You may also have to pay tax in the country where the overseas property was located. If
you
are subject to paying double taxation, there may be reliefs available depending on what
tax
agreements are in place with the UK and the country where you made the taxable gain.
There is
also additional guidance available for dual residents.
There are special rules if you are resident in the UK, but your permanent home or
domicile is abroad.
Seek advice from a tax professional.
Reporting Capital Gains losses
When you report a loss, the amount is deducted from the gains you made in the same tax
year.
If your total taxable gain is still above the yearly tax free allowance, you can deduct
unused
losses from previous tax years. If they reduce your gain to the tax-free allowance, you
can carry forward the remaining losses to a future tax year.
Claim for your loss by including it on your tax return. If you’ve never made a gain and
are not registered for Self Assessment, you can write to HMRC instead.
You do not have to report losses straight away - you can claim up to 4 years after the
end of the tax year that you disposed of the asset.
Do I need to pay Capital Gains Tax on shares?
With other assets, such as shares, the basic-rate of CGT is 10%, and the higher-rate is
20%.
Special Capital Gains rules for shares and unit trusts
Gains made on the sale of shares and unit trusts have special CGT rules.
Capital growth from unit trust investments could be subject to either income tax and/or
Capital
Gains Tax. The amount of tax you may potentially be liable for depends upon the type of
share
class you have chosen and the level of income or capital growth you have received.
Unless they're held in a pension or ISA, you will need to consider Capital Gains Tax
when
selling shares, funds, investment trusts, cryptocurrencies such as Bitcoin, or other
financial
products for a profit.
The special rules are complex, so contact dns accountants for help and Capital Gains Tax
advice about your Capital Gains Tax liabilities on the sale of shares etc.
Reporting and paying Capital Gains Tax
You must report any capital gains and pay any money you owe by specific deadlines set by
HMRC.
When you must report and pay:
If you sold a residential property in the UK with a completion date on or after 27
October 2021,
you must report and pay CGT within 60 days.
If you sold a residential property in the UK with a completion date between 6 April 2020
and 26
October 2021, you must report and pay CGT within 30 days.
If you have other gains to report in the tax year after you sold or disposed of an asset
you
should use a Self Assessment tax return.
If you’re eligible, you may be able to use the ‘real time’ Capital Gains Tax service to report by 31
December in the tax year after the sale
Do not wait until the next tax year to report gains on UK residential property sold since 6 April
2020. You may have to pay interest and a penalty if you do.
Expert tax advice from Capital Gains Tax Accountants
Here at dns accountants we offer specialist help on all areas of Capital Gains Tax
advice. We
are qualified tax advisors and accountants. Our services include areas such as:
- Your Capital Gains Tax liability.
- Capital Gains Tax bills.
- Capital Gains Tax rates.
- Capital Gains Tax allowance.
- How to offset Capital Gains Tax.
- Self assessment tax return.
- Potential tax reliefs.
- Tax planning.
We offer a free initial consultation, so why not call our team on 03300 886 686,
or email on enquiry@dnsaccountants.co.uk.