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How to avoid or reduce capital gains tax on property sales

If you are considering selling your UK home, there are special reporting and tax payment rules for disposals of UK residential property.

The sale will always be within the scope of UK capital gains tax, irrespective of your resident status, nationality status or citizenship status at the date of disposal.

We have highlighted 5 key areas to consider if you are selling your UK home.

1. What is the UK’s CGT tax rate?

The CGT rates for residential property gains are 18% and/or 28%. The tax rate is dependant on your level of income. Furthermore, the first £6,000 of the gain will be exempt from CGT (reducing to £3,000 in the 2024/25 tax year) under the ‘annual exempt amount’ allowance. This allowance is available to everyone other than residents using the remittance basis.

2. How is the gain calculated?

The gain is calculated by taking the sales proceeds and deducting qualifying costs.

Qualifying costs include:
– purchase cost; and
– costs associated with sale and purchase such as estate agent fees, solicitor fees and stamp duty; and
– capital enhancement expenditure such as loft conversion, conservatory and renovations.

3. What tax reliefs are available?

The gain can be further reduced by private residence relief for the period(s) that the property was your main residence and physically occupied.

Certain periods of absence may qualify for private residence relief providing that requirements are met which broadly require the period of absence to be preceded and succeeded by actual occupation.

The last nine months of ownership always qualify for private residence relief providing that the property was your main residence and physically occupied at some point during ownership.

4. What if you are living outside the UK?

If you are non-resident at the date you sell the property, only the portion of the gain from April 2015 will be subject to CGT.

There are different methods to calculate this portion and the method that gives the most beneficial tax result can be used.

5. Do you need to tell HMRC?

If you are non-resident, you need to complete an online property return irrespective of whether capital gains tax is payable or not. If you are resident, you need to complete an online property return only if capital gains tax is payable.

The return must be completed within 60 days of the disposal date.

How can GTC help?

We can prepare a capital gains tax calculation to calculate your capital gains tax bill. In addition, we can provide advice on how you can reduce your capital gains tax bill through spousal transfers and private residence relief. Finally, we can prepare and submit an online property return on your behalf with HMRC.

Become a GTC client

Book a free discovery call with our team. We will collect background information to develop a greater understanding of the necessary steps to take to optimise your UK tax affairs.

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