Understanding Capital Gains Tax (CGT) on UK property sales

If you're a property investor, staying informed about Capital Gains Tax (CGT) is essential when selling UK property. Rules are always changing, and knowing your obligations can help you avoid costly mistakes.

What CGT when making a property sale?

CGT is a tax on the profit you make when you sell or dispose of a property that has increased in value. The tax is only applied to the gain, the difference between what you paid for the property and what you sold it for, after deducting allowable expenses like legal fees, estate agent fees, and the cost of any improvements made.

CGT reporting

Since 6th April 2020, If you sell a UK residential property, you have 60 days from the completion date to report the sale to HMRC and pay any CGT owed. This rule applies to both UK residents and non-residents. Missing this deadline can result in penalties and interest. Non-UK residents must also report the disposal of UK properties within 60 days, regardless of whether any CGT is due. This applies to both residential and non-residential properties.

When is CGT due?

You will need to report and pay CGT when you sell or dispose of:

• Properties that aren’t your main residence: This includes second homes, buy-to-let properties, or holiday homes.
• Inherited property: If you sell an inherited property that wasn’t your main residence, you may incur CGT.
• Other property transactions: This includes gifting property to a connected person (except to a spouse or civil partner) or when you receive something of value in return for the property.

Exemptions and reliefs

You won’t need to report or pay CGT in certain cases:

• Private Residence Relief: If the property was your main home for the entire period of ownership, you may be exempt from CGT.
• Transfers to spouses or civil Partners: No CGT is payable when transferring property to a spouse or civil partner.
• Selling at a Loss: Selling a property at a loss does not incur CGT, and the loss can be used to offset future gains.