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Capital Gains Tax (CGT) on Residential Property for Individuals

You may have a question; “Should I have to pay Capital Gains Tax (CGT) when selling my residential property?” The short answer is that it depends on your personal circumstances. Read on CGT affairs in this article related to residential property that owned by individuals.

What is Capital Gains Tax (CGT)?

Capital Gains Tax applies to several common assets: property, shares, bonds, precious metals and so on when you dispose of them either in the form of sale, gift, exchange, or transfer. However, you should declare the CGT to HM Revenue and Customs whether you make profits or losses on the disposal.

Individuals have tax free annual allowance (also known as “annual exemption”) of £12,300 (currently) for their capital gains. However, the CGT rate depends on individual income level and the size of the gains. Moreover, the rate of the CGT is different from residential property than any other chargeable assets.

The CGT Matters When Selling a Residential Property

If you are selling a residential property in the UK and used to live in the property as main home, generally no capital gains tax is payable. However, you might face a CGT bill on the profits you make from second home or buy-to-let property disposal.

On the residential property, the basis rate taxpayers pay CGT at 18% on their gains. However, you need to pay at 28% if you are higher or additional rate taxpayers in the UK.

Moreover, you have the reporting and paying CGT requirements on the residential property. If your total taxable gains are above the tax-free allowance, you should report and pay the CGT within 60 days (from 21 October 2021) of the sale completion date. Failure to meet the deadline, you may face paying interest charges and penalty as well.    

How to Reduce the CGT Bill Legitimately?

You should have a plan in place first and discuss with your tax advisors who can support on your CGT matters. Here are some points that might be useful for your plan to reduce the CGT bill lawfully:

  • Use the available spouse tax free allowance
  • Take time carefully and consider delaying the sale to get CGT allowance in the next tax year
  • Nominate the property as your main residence where possible to have PPR relief
  • Deduct all available allowable costs, not only the purchase price (legal fees, agent fees, stamp duty, costs involved for property improvement or extension).

How can The Stan Lee help on CGT?

At The Stan Lee, we offer the CGT computation and the return submission to HM Revenue & Customs at reasonable fees. You will get the other ad hoc services related to the CGT. Please call us and let’s find out how we support for your CGT affairs.