Written by Polly Greenway, CEO of DOMVS
Capital Gains Tax for UK Property
Capital gains tax (CGT) on UK property is payable when you sell or dispose of a property and make a profit. The amount of CGT payable will depend on a number of factors, such as the purchase price, sale price, and any allowable expenses.
It is important to note that if you sell a property that is your main residence, you will be entitled to exemptions and relief, which can reduce or eliminate the amount of CGT payable. However, if you have more than one property or have not lived in the property as your main residence for the entire period of ownership, the rules can be more complex.
When is Capital Gains Tax for UK Property Payable?
The deadline for paying capital gains tax on UK property is usually January 31st following the end of the tax year in which the sale took place. For example, if you sell a property in the 2021/22 tax year (which runs from April 6, 2022, to April 5, 2023), the deadline for paying any capital gains tax owed is January 31, 2024. Sellers should note that they have 60 days from the completion date to report the sale to HMRC.
Proposed Changes for the UK’s Capital Gains Tax
The government has proposed changes to the capital gains tax rules for UK property, and it is important for property owners to understand what these changes entail.
Currently, the capital gains tax rate for UK property is 18% for basic rate taxpayers and 28% for higher rate taxpayers. However, the government has proposed changes to this tax rate, which could significantly impact property owners. Up to date capital gains tax can be found on the Government website here.
The first proposed change is the introduction of a new capital gains tax rate for UK property. This new rate will be set at 20%, which is higher than the current rate for basic rate taxpayers but lower than the current rate for higher rate taxpayers. This change will impact those who are currently taxed at the lower rate but will benefit those who are currently taxed at the higher rate.
The second proposed change is the reduction of the annual exempt amount for capital gains tax. Currently, individuals can earn up to £12,300 in capital gains tax before they are required to pay any tax. The government has proposed reducing this amount to £6,000 for individuals and £3,000 for most trustees. In the following tax year, these exemptions will be lowered again – see proposals here.
These proposed changes will impact property owners in different ways. Those who are currently taxed at the higher rate will benefit from the introduction of a new, lower tax rate. However, all property owners will be impacted by the reduction in the annual exempt amount and the removal of the capital gains tax exemption for primary residences.
Professional Tax Advice for UK Property Owners
The UK government regularly reviews and updates tax policies, including capital gains tax on property. It is important to stay up-to-date with any changes to tax laws that may affect your property transactions.
If you are planning to sell a property and are unsure about the current capital gains tax rates and allowances, it is recommended to consult with a qualified accountant or tax specialist for the most accurate and up-to-date information. They can advise you on your tax obligations and help you to minimise your tax liabilities while staying compliant with tax regulations.
Recently, the DOMVS team has noticed an increase in the number of its clients seeking advice about CGT, partly due to the rise in those looking to sell an additional residence that has either been a rental investment or holiday home, as well those who have inherited a probate property.
For further advice, the DOMVS team can introduce you to local specialists who can ensure you maximise your property sale. The property market has undoubtedly changed over the past year, and the rental value of your property may have to. To receive a free, up to date rental valuation of your property from our Lettings team, click here.
Alternatively, click the button below for an instant sales valuation.
