Capital gains tax is paid on the profits of the sale of most assets, but there are exemptions. Our guide will explain the details, especially relating to property.
Capital gains tax is the tax paid on the profit made from the sale of an asset when compared to the price it was purchased for. When it comes to property, capital gains tax (CGT) typically doesn’t apply to your main place of residence but will apply to second homes and rental properties.
CGT will need to be paid on any assets that have been sold for a substantial profit. This may include
While CGT is paid on most capital gains, it is not paid on all of them. As well as your main residence, the following assets are exempt from CGT:
As previously stated, CGT will generally only apply to the sale of properties other than your main home, unless your home is part leased or used for commercial purposes.
In the UK, the basic-rate of CGT on assets other than property is 10%, with the higher-rate being 20%. However, with property, CGT rates are higher:
It’s important to remember that any capital gains you make will be included when calculating your tax status for the year, which may affect your tax bracket.
All taxpayers have an annual CGT allowance, which means you can earn a certain amount of profit without paying tax on it. In 2018/19, you will not pay tax on capital gains of up to £11,700, while couples that share assets can combine this allowance to get a maximum potential tax-free allowance of £23,400.
For further information about capital gains tax and to find out exactly how much you will pay on the sale of your assets, visit the government’s capital gains tax page.
All information contained in this website is provided as a guideline only, is based on estimates and assumptions, may not be accurate or complete, and is subject to change. We make no representations or warranties with regards to this information, expressed or otherwise. A buyer who relies on such information does so at their own risk. Buyers are advised to seek independent financial advice and should undertake their own due diligence.
Your capital is at risk. Property values may decline and the property might not be able to be rented at amounts sufficient to cover debt interest costs, operating expenses and liabilities, and might not result in a positive cash flow. Property is an illiquid asset and should not be viewed as a short-term investment.
In no event will we be liable for any loss or damage, including without limitation any loss or damage arising directly or indirectly out of or in connection with the use of this website and the information contained therein.
Authorised and regulated by the property ombusdman
Copyright © 2023 Vesta Global Limited. All rights reserved.