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Capital Gains Tax When Selling A Property


Capital Gains Tax is one of the biggest talking points in relation to property based in the U.K. From property owners to investors, more people seek to understand more about Capita Gains Tax, such as; how it works, when it is payable, and how much is payable.
This article will explain all you need to know about Capital Gains Tax on U.K. property, so you know what to expect when next you are dealing with a property transaction that attracts this tax.

What is Capital Gains Tax?


Capital Gains Tax (CGT) is a tax payable in the United Kingdom on the part of the capital gain or profit realised from the sale or disposal of a chargeable asset, such as land or property, provided the property is not the main residence of the seller.
A seller may pay CGT on their main home if they have leased out parts or all of the property or use the same as business premises. CGT also applies to the sale of a house or flat that was inherited, bought as an investment, or bought as a second property, for instance, a holiday home. But a property given to a charity, civil partner, or spouse is exempted from CGT.
CGT is payable on any investment property owned by a seller who is an employed person, an unemployed person, a self-employed sole trader, or a person in a business partnership. CGT does not apply to Limited Companies as corporation tax will be applicable for Limited Companies.

When should a seller pay their Capital Gains Tax?


As a seller, you are due to pay your Capital Gains Tax as soon as the property is sold. While it is advisable to report such sales instantly, the official deadline for the payment of the CGT is 30 days from the date of conveyance to report your disposal and pay any tax due. You’ll get a late filing penalty and be charged interest if you do not do this by the 30-day deadline.

  • If you miss the deadline by:
    up to 6 months, you will get a penalty of £100
  • more than 6 months, a further penalty of £300 or 5% of any tax due, whichever is greater
  • more than 12 months, a further penalty of £300 or 5% of any tax due, whichever is greater
  • the 31st January of the year after the tax year in which you realized the profit.

What is the exact amount payable as Capital Gains Tax?

The exact amount payable depends on two factors:

  1. The amount realised as profit from the sale or disposal, which is the taxable or capital gains; and
  2. The rates at which the Capital Gains Tax is charged.

The HMRC (Her Majesty’s Revenue and Customs), the tax authority of the U.K. government, determines the rates at which a seller pays the CGT on their property. To do this, they use the personal income of the seller and the taxable gains from the property. The sum of both metrics helps determine which Income Tax band the seller falls into in the year of the sale. With this determined, the seller is expected to pay the CGT at the stipulated rates on the taxable part of their capital gain.


A practical example:
If a seller purchased a property for £150,000 and decided to sell the same property at the rate of £500,000, the net profit, which is also the total taxable gain, is £350,000. This means that the CGT will be payable on the £350,000 profit.

What are the deductible expenses from the Taxable Gains?


While the seller cannot deduct the mortgage interest and the property’s maintenance costs, they can deduct a few other expenses to reduce the amount payable as Capital Gains Tax on the sold property.

These expenses include:
– Estate agents, solicitors, surveyor, and other standard buying and selling costs;
– Stamp duty paid when the property was initially purchased; and
– Costs for improving or upgrading the property

So, your taxable gain after deductible expenses is what you have left after deducting the sales price and other costs associated with buying, selling, and improving the property.


Let’s assume that the deductible expenses from the taxable gains on our hypothetical property totalled £30,000; it means the taxable gain after deductible expenses is £350,000 minus £30,000, which is £320,000.

What is Capital Gains Tax Allowance?


The Capital Gains Tax-Free Allowance is the amount of profit you can make from an asset in a tax year before any tax is payable. The tax authorities determine the exact CGT allowance, and it is set at the start of every tax year. For the year 2021, the Capital Gains tax-free allowance is £12,300. So, you do not have to pay any CGT on the first £12,300 you make from the sale of your property.

The final taxable gain from the example above is £320,000. The taxable gains after the CGT allowance will be £320,000 minus £12,300, which is £307,700. In situations where the final taxable gain is less than the Capital Gains Tax allowance, the seller does not need to pay CGT.

Summarily, the simple formula for calculating your final taxable gain is:

Taxable Gains After Allowable Expenses and Allowance = Taxable Gain or Net Profit – (deductible expenses + Capital Gains Tax Allowance)

From our example, you have:


TGAAEA = £350,000 – (£30,000 + £12,300)
= £350,000 – £42,300
= £307,700


With this, the seller can start working out the rates at which they will pay CGT on the sold property, depending on the tax band they fall into as determined by the HMRC.

What is Capital Gains Tax Relief?

Certain reliefs can further reduce the amount of Capital Gains Tax a seller is expected to pay on a property. These include the Lettings Relief and the Private Residence Relief.

Is CGT the only tax due on U.K. property?

No, there are other taxes levied on U.K. property asides from the Capital Gains Tax. However, these taxes are also payable when the property is being sold, including stamp duty on the purchase price, council tax, income tax on rent, and inheritance tax.

Let’s answer your questions.


If you have any questions or would like to know more about Capital Gains Tax or other applicable property taxes on your property? Feel free to get in touch today. We will be more than happy to help.

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Capital Gains Tax When Selling A Property

Capital Gains Tax is one of the biggest talking points in relation to property based in the U.K. From property owners to investors, more people seek to understand more about Capita Gains Tax, such as; how it works, when it is payable, and how much is payable. This article will explain all you need to know about Capital Gains Tax on U.K. property, so you know what to expect when next you are dealing with a property transaction that attracts this tax.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax payable in the United Kingdom on the part of the capital gain or profit realised from the sale or disposal of a chargeable asset, such as land or property, provided the property is not the main residence of the seller. A seller may pay CGT on their main home if they have leased out parts or all of the property or use the same as business premises. CGT also applies to the sale of a house or flat that was inherited, bought as an investment, or bought as a second property, for instance, a holiday home. But a property given to a charity, civil partner, or spouse is exempted from CGT. CGT is payable on any investment property owned by a seller who is an employed person, an unemployed person, a self-employed sole trader, or a person in a business partnership. CGT does not apply to Limited Companies as corporation tax will be applicable for Limited Companies.

When should a seller pay their Capital Gains Tax?

As a seller, you are due to pay your Capital Gains Tax as soon as the property is sold. While it is advisable to report such sales instantly, the official deadline for the payment of the CGT is 30 days from the date of conveyance to report your disposal and pay any tax due. You’ll get a late filing penalty and be charged interest if you do not do this by the 30-day deadline.
  • If you miss the deadline by: up to 6 months, you will get a penalty of £100
  • more than 6 months, a further penalty of £300 or 5% of any tax due, whichever is greater
  • more than 12 months, a further penalty of £300 or 5% of any tax due, whichever is greater
  • the 31st January of the year after the tax year in which you realized the profit.

What is the exact amount payable as Capital Gains Tax?

The exact amount payable depends on two factors:
  1. The amount realised as profit from the sale or disposal, which is the taxable or capital gains; and
  2. The rates at which the Capital Gains Tax is charged.
The HMRC (Her Majesty’s Revenue and Customs), the tax authority of the U.K. government, determines the rates at which a seller pays the CGT on their property. To do this, they use the personal income of the seller and the taxable gains from the property. The sum of both metrics helps determine which Income Tax band the seller falls into in the year of the sale. With this determined, the seller is expected to pay the CGT at the stipulated rates on the taxable part of their capital gain. A practical example: If a seller purchased a property for £150,000 and decided to sell the same property at the rate of £500,000, the net profit, which is also the total taxable gain, is £350,000. This means that the CGT will be payable on the £350,000 profit.

What are the deductible expenses from the Taxable Gains?

While the seller cannot deduct the mortgage interest and the property’s maintenance costs, they can deduct a few other expenses to reduce the amount payable as Capital Gains Tax on the sold property. These expenses include: – Estate agents, solicitors, surveyor, and other standard buying and selling costs; – Stamp duty paid when the property was initially purchased; and – Costs for improving or upgrading the property So, your taxable gain after deductible expenses is what you have left after deducting the sales price and other costs associated with buying, selling, and improving the property. Let’s assume that the deductible expenses from the taxable gains on our hypothetical property totalled £30,000; it means the taxable gain after deductible expenses is £350,000 minus £30,000, which is £320,000.

What is Capital Gains Tax Allowance?

The Capital Gains Tax-Free Allowance is the amount of profit you can make from an asset in a tax year before any tax is payable. The tax authorities determine the exact CGT allowance, and it is set at the start of every tax year. For the year 2021, the Capital Gains tax-free allowance is £12,300. So, you do not have to pay any CGT on the first £12,300 you make from the sale of your property. The final taxable gain from the example above is £320,000. The taxable gains after the CGT allowance will be £320,000 minus £12,300, which is £307,700. In situations where the final taxable gain is less than the Capital Gains Tax allowance, the seller does not need to pay CGT. Summarily, the simple formula for calculating your final taxable gain is:

Taxable Gains After Allowable Expenses and Allowance = Taxable Gain or Net Profit – (deductible expenses + Capital Gains Tax Allowance)

From our example, you have:

TGAAEA = £350,000 – (£30,000 + £12,300) = £350,000 – £42,300 = £307,700

With this, the seller can start working out the rates at which they will pay CGT on the sold property, depending on the tax band they fall into as determined by the HMRC.

What is Capital Gains Tax Relief?

Certain reliefs can further reduce the amount of Capital Gains Tax a seller is expected to pay on a property. These include the Lettings Relief and the Private Residence Relief.

Is CGT the only tax due on U.K. property?

No, there are other taxes levied on U.K. property asides from the Capital Gains Tax. However, these taxes are also payable when the property is being sold, including stamp duty on the purchase price, council tax, income tax on rent, and inheritance tax. Let’s answer your questions. If you have any questions or would like to know more about Capital Gains Tax or other applicable property taxes on your property? Feel free to get in touch today. We will be more than happy to help.

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