Capital gains tax
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UK residents
Contact us for tax advice and services for landlords based in the UK where you are thinking of disposing of flats or houses which you are currently renting out. If you have sold a residential property and there is capital gains tax to pay, you need to make a report and pay the tax to HMRC within 60 days (30 days prior to 27th October 2021) of completion of the sale.
Non-residents
If you live overseas, own any property in the UK and are considering selling it, talk to us about how to avoid potential tax pitfalls. You need to make a report and pay the tax to HMRC within 60 days (30 days prior to 27th October 2021) of completion of the sale for any type of property sale.
Frequently asked questions
Can I claim Capital Gains Tax Rollover Relief?
Rollover Relief is available on furnished holiday lettings and on certain trading assets. If you reinvest all or some of your proceeds, you may be able to defer the gain by claiming rollover relief.
Rollover relief however is not available to most landlords as BTL property is not included under the relief.
How do I report and pay CGT?
For UK residents, the disposal of UK residential properties must be reported and the payment of Capital Gains Tax must be made within 60 days of the completion of the sale where there is a Capital Gains Tax liability.
For non-UK residents, the disposal of all properties must be reported and the payment of Capital Gains Tax must be made within 60 days of the completion of the sale whether or not there is tax to pay.
For detailed guidance on the new rules please read our article on reporting and paying capital gains tax on UK property.
I am non-resident how much CGT do I pay?
As a non-resident, if you owned the residential/commercial property at 5th April 2015/5th April 2019 then you can use the value as at 5th April 2015/5th April 2019 as the base cost when calculating CGT. To work out your capital gains tax.
Please see the article on capital gains tax as a uk non resident for more detailed guidance.
What Capital Gains Tax relief or allowances do I get when I sell my property?
There is an annual capital gains tax allowance of £12,300 for 2020/21 to 2025/26 for everyone.
You will also get Principle Private Residence relief for any period of time that you have lived at the property as your main residence plus the final 9 months.
How do I pay capital gains tax to HMRC?
To pay capital gains tax to HMRC, you can follow these steps:
1. Calculate your capital gains: Determine the amount of capital gains you have made by subtracting the cost of the asset (including any enhancement expenditure) from the proceeds of the sale, minus any selling costs.
2. Report the gain: If you are a UK resident, you must report the gain and pay any capital gains tax due within 60 days of completing the sale. Non-UK residents must also report the gain within 60 days, regardless of whether there is tax to pay or not.
3. Complete the tax return: You will need to complete the relevant sections of the self-assessment tax return to report your capital gains. If you don’t already complete a tax return each tax year, you will need to register for Self Assessment.
4. Pay the tax: Once you have reported the gain, you will need to pay the capital gains tax owed to HMRC. The payment can be made online or by bank transfer using the details provided by HMRC.
How far back can HMRC go for capital gains tax?
Generally, HMRC can go back up to 4 years from the end of the tax year to which the assessment relates to assess Capital Gains Tax.
– However, if there has been a loss of tax due to careless or deliberate behavior, HMRC can go back up to 6 years.
– In cases of fraud or if you have not submitted a tax return, there is no time limit, and HMRC can go back as far as necessary to assess the tax liability.
It’s important to note that these time limits are subject to change, and it’s always best to consult with a tax advisor or HMRC for the most up-to-date information regarding Capital Gains Tax assessments.
How can I avoid Capital Gains Tax on rental property?
In certain circumstances you may be able to reduce or avoid entirely any capital gains tax. For example:
Mrs Jones owns a property in her own name. It may be an idea to transfer the property into joint names with Mr Jones before a sale assuming that Mr Jones has not already used his CGT exemption in the tax year concerned. You do have to take into account the levels of income of each partner because the rate of capital gains tax for one partner may be higher than that of the other partner. Care does need to be taken as if this is carried out shortly before a sale, then HM Revenue and Customs may attack the transaction as invalid under anti-avoidance rules. You also need to ensure that any income received in the period after transfer of the property is declared on each spouse’s tax return which may increase the income tax paid. There would also be the costs of conveying the property into joint names.
What is Principal Private Residence Relief?
Principal Private Residence relief is a tax relief given on the sale of a property which has at any time during your ownership been occupied as your main residence.
Please read our guide to ppr relief for more information.
I am divorcing. Where do I stand with Capital Gains Tax on transfers of property to my ex-partner?
Going through a divorce can be a stressful time so it is vital that you seek professional advice.
If you are in the process of divorce, the period of CGT relief between spouses is extended but only until the end of the tax year of separation. For more detailed information on this please see the following post all about capital gains tax and divorce.
Do limited companies pay Capital Gains Tax?
No. Companies pay corporation tax. If you hold property in a company and make a sale, the profit is subject to corporation tax at 19%. From 1st April 2023, the Government has proposed that the first £50,000 will be taxed at 19%, the next £200,000 will be taxed at 26.5% and the remaining profits will be taxed at 25%. Where companies are under common control the bands are shared equally between each of the associated companies.
How long do you have to live in a property to avoid capital gains tax?
To avoid capital gains tax on a property, you need to meet the criteria for Principal Private Residence relief. Here’s what you need to know:
– Residence Requirement: To qualify for Principal Private Residence relief, you must have lived in the property as your main residence for a certain period of time.
– 90-Day Rule: Since 6th April 2015, you need to be a resident of the property for at least 90 days in the relevant tax year to claim Principal Private Residence relief.
– Final Nine Months: Even if you have not lived in the property for the entire ownership period, you can still receive relief for the final nine months before the sale.
– Joint Ownership: If you jointly own the property with someone else, both owners can claim Principal Private Residence relief if they meet the residence requirements.
– Transfer of Ownership: In certain circumstances, transferring the property into joint names before a sale may be beneficial for tax purposes, especially if one partner has not used their capital gains tax exemption.
It’s important to note that these rules apply to UK residents. Non-residents may have different tax obligations and rules regarding capital gains tax.
How much is capital gains tax?
In the UK, the capital gains tax rate depends on your income and the type of asset you are selling. Here are some key points to consider:
– For individuals, the capital gains tax rates are 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers.
– For residential property sales, the rates are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers.
– There is an annual capital gains tax allowance of £ 3000 for individuals (2024/25), which means that you can make gains up to this amount without being subject to tax.
– Non-residents may also be liable to pay capital gains tax on UK property sales.
It’s important to note that these rates and allowances may be subject to change, so it’s always a good idea to consult with a tax professional or contact UK Landlord Tax for the most up-to-date information.
Industry knowledge
You can find out more about capital gains tax and other issues affecting UK landlords through blog posts, guides and frequently-asked-question responses put together by our team of property tax experts. We make it make sense.
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