How is cryptocurrency taxed in the UK?
Tags :
Latest
Share :
Capital Gains Tax on Property
March 15, 2022
If you sell a property in the UK, you might need to pay capital gains tax (CGT) on the profits you make.
You generally won’t need to pay the tax when selling your main home.
However, you will usually face a CGT bill when selling a buy-to-let property or second home. You may also need to pay CGT if your home is partly used as a business premises, or if you lease out part of your property.
CGT rates on property
In the UK, you pay higher rates of CGT on property than other assets.
Basic-rate taxpayers pay 18% on gains they make when selling property, while higher and additional-rate taxpayers pay 28%.
With other assets, such as shares, the basic-rate of CGT is 10%, and the higher-rate is 20%.
Bear in mind that any capital gains will be added to your other income sources when working out which income tax bracket you’ll fall into for the year, and therefore might push you into a higher bracket.
All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free.
In 2021-22 you can make tax-free capital gains of up to £12,300 – the same as 2020-21. This figure will stay the same in 2022-23.
Couples who jointly own assets can combine this allowance, potentially allowing a gain of £24,600 without paying any tax.
You’re not allowed to carry over any unused CGT allowance into the next tax year – so if you don’t use it, you’ll lose it.
How much CGT will I pay and when it is due?
As the name suggests, CGT is only charged on the gains you make (the profit), rather than the full amount you sell the property for.
To work out your gain, you can deduct the amount you originally paid for the property from the sales price.
You can also deduct any legitimate costs involved with buying and selling the property. This includes things like broker fees, stamp duty, and some improvements to the property that were made while you owned it.
You can also offset losses you’ve made when selling other assets. For instance, if you own several properties and make, say, a £50,000 loss when selling one of them, you can use that against the gains you make from another property and therefore reduce your overall CGT bill.
You should claim any losses on your self-assessment tax return, or by calling HMRC. You can claim losses up to four years after they were incurred.
For any taxable gains above the tax-free allowance of £12,300 in 2021-22 (the same as in 2020-21), you’ll pay the CGT property rates.
For UK properties sold on or after 27 October 2021, you’ll need to pay the tax owed within 60 days of the completion of the sale or disposal.
You’ll do this by submitting a ‘residential property return’ and making a payment on account.
For property sales made between 6 April 2020 and 26 October 2021, the window to pay your CGT bill was 30 days.
Have Any Question?
If it’s an urgent question or just a simple query, get in touch.