Capital Gains Tax on Property

Tax Planning

Capital Gains tax on property. The April 2015 changes have in some ways made CGT advice more complex. We can help you with advice on property sales and tax

If you sell a property, you might have to pay tax. This tax is called capital gains tax. The amount you might have to pay will depend on the amount of profit you make.

If the property you are considering selling is your main residence then you would normally be entitled to “Principle private residence relief”. This relief normally allows you to you to sell your home without incurring capital gains tax (CGT).

Partial relief to capital Gains Tax

If the property to be sold was at some point your main residence then you could be entitled to partial relief on the profits made. This can be a complex calculation and will also depend on the length of time the property was your main home, how long it was rented as well as the expenses you incurred and the net profit from the sale. Certain periods of time are excluded depending on the reasons the property was rented out. These need to be taken into account when disposing of the property.

Properties subject to CGT

Some types of properties that might be subject to capital gains:

  • Investment property
  • Buy to let
  • A second home
  • Business premises
  • Land, for example agricultural land

Calculating Capital Gains Tax

The Government has a Capital Gains Tax Calculator in the .Gov.UK website. We have found this useful for clients.  This might give a rough guide to the possible CGT you might have to pay. IT won’t deal with complex capital gains tax calculations and we would therefore always recommend you speak to an appropriately qualified adviser and if necessary seek professional advice.

Tax payers also need to be aware if they sell any other assets or investments that might be subject to CGT in the same tax year and the profits will be amalgamated together. Assets that are jointly owned any profits need to be split between the owners on an appropriate basis.

Changes to CGT Calculations

As from April 2015 the way CGT is calculated has changed and it is now more closely linked to your income in each tax year. However, if the property is not covered under the private residence relief exemption, then you might have to pay capital gains on any profit.

Advising HMRC

It will be necessary for you to complete a self-assessment tax return to tell HMRC of the gain you have made. So, for example if you sold your property in June 2016 then the sale would fall in the 2016/2017 tax year. If you submit your self-assessment tax return online then you would need to do this by 31 January 2017 and pay any due tax at this point. Late payment of tax would incur penalties and interest for the amount of time outstanding.

More Information

For more information on capital gains tax on property please contact us. The Government website also gives more guidance on capital gains tax rules and regulations. We would recommend having a look at it. The site can be found at  HMRC info on CGT

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