Capital Gains Tax On Property

Capital Gains Tax On Property: In the United Kingdom, capital gains tax (CGT) is a tax that is levied on the profit made from the sale of assets, including property. When you sell a property that is not your primary residence and make a profit, you may be liable to pay capital gains tax on that profit.

Here are some key points about capital gains tax in the UK:

1. Rates: The rates of capital gains tax in the UK depend on the taxpayer’s income tax band. For individuals in 2022, the rates are typically 18% for basic rate taxpayers and 28% for higher and additional rate taxpayers. For residential property, the rates can be higher, with 28% being the standard rate for higher and additional rate taxpayers.
2. Annual Exemption: There’s an annual tax-free allowance known as the Annual Exempt Amount, which allows you to earn a certain amount of capital gains tax-free each tax year. For the tax year 2021/2022, this amount is £12,300 for individuals and £6,150 for most trusts.
3. Principal Private Residence Relief (PPR): If the property being sold has been your main residence (your primary home) for all the time you’ve owned it, you may be entitled to PPR relief, which exempts you from paying capital gains tax on any profit made. This relief can be quite valuable, particularly for individuals who have owned the property for a long time and have seen significant appreciation.
4. Letting Relief: If you’ve let out part or all of your property, you may be eligible for letting relief, which can further reduce your capital gains tax liability.
5. Reporting and Payment: Property sales must be reported to HM Revenue and Customs (HMRC) within a specific time-frame after the sale, generally 60 days.
6. Non-Resident Capital Gains Tax: If you’re a non-UK resident and you sell residential property in the UK, you may be liable to pay capital gains tax under the Non-Resident Capital Gains Tax (NRCGT) regime.
7. Special Cases: There may be special rules or exemptions that apply in certain situations, such as if the property is transferred as part of a divorce settlement or if it’s sold as part of an inheritance.

It’s essential to keep accurate records of property transactions. Tax rules can be complex and subject to change, so it’s important to stay informed about the latest regulations.  For more information regarding Capital Gains Tax, HMRC’s website has a guide https://www.gov.uk/tax-sell-property