Who Pays Capital Gains Tax (CGT)?
Capital gains tax on property Capital gains tax is payable on the sale of second homes and buy-to-let property. You generally won’t need to pay the tax when selling your main home (unless you have developed it to use parts of it for business)- however, you may also need to pay CGT if your home is partly used as a business premises, or you lease out part of your property.
How much CGT will I pay?
To work out your gain, deduct the amount you originally bought the property for from the sales price. Then deduct any legitimate costs involved with buying and selling, such as broker fees, stamp duty, and improvements to the property while you owned it.
The amount you pay is a % of the figure arrived, minus and any annual CGT tax free allowance you might have.
What Are Legitimate Costs
You’re allowed to deduct certain costs involved with buying and selling property from your gain when working out your CGT bill.
These include: solicitors and estate agents’ fees stamp duty when buying the property. Costs involved with improving assets, such as paying for an extension, can also be taken into account when working out your taxable gain.
Example of selling a second home
Capital gains tax on gifted and inherited homes
If anyone leaves their home to you in their will, you inherit the property at its market value at the time of death. There is no capital gains tax payable on death, but if you sell the property without having made it your own home, there could be CGT to pay.
This will be based on the increase in value between the date of death and the date when you sell, minus any associated selling costs.
If you’re given the home during the owner’s lifetime while they are still living there, you may have to pay CGT if you eventually sell the home after they die. The amount will be based on the increase in value between the date they gave you the property (not the date of their death) and the date you sell.
When is capital gains tax due?
Anyone who makes a taxable capital gain from UK residential property in the 2021-22 tax year will have to pay the tax owed within 30 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. You used to be able to wait until you submitted your tax return to inform HMRC of a sale, but that changed from the 2020-21 tax year.
How Can National Residential Help You Minimise Your CGT Bill?
By Organising a Free Tax Consultation for Friends of National Residential
Being a private landlord with over 100 properties in his portfolio, our CEO David Coughlin is no stranger to CGT complications. He has negotiated a FREE Tax consultation for friends of National Residential with Fusion Consulting (David’s preferred tax experts).
Also, with many investors speculating a review of capital gains tax commissioned by chancellor Rishi Sunakrt in 2020 and completed earlier this year will eventually result in raised tax rates and reduced allowances; buy-to-let landlords are rushing to sell their investment properties before they are introduced.
Landlord Sales Services
National Residential specialise in selling investment properties with minimum void time and expert help in managing sitting tenants. Unlike high street estate agents, we liaise directly with tenants to make sure they are on our side by removing obstacles stopping them finding alternative accommodation and incentivising their cooperation.
The result is cheaper, quicker, more efficient and altogether a far more pleasant experience for everyone involved – esp landlords – than chasing legal proceedings, which we reserve as a last option.
For more information about our Landlord Sales options, please read a recent case study ‘Landlord overjoyed as he sells his tenanted property portfolio with National Residential for half a million in just 26 days‘
Another way to beat any planned changes that may or may not be likely, is of course to sell AND COMPLETE all legal proceedings before they are introduced (widely expected to be introduced in 2021 after a government led review into overhauling them in 2020).
With average sales and completions in the UK high street estate agents taking 6 months or more and 30+% of sales falling through, National Residential is a one stop shop for landlords to benefit from FAST, SECURED sales to beat any feared capital gains price rises.
Beat Deadlines And Avoid Sales Fails With FAST, SECURED SALES
Traditional High Street Type Sales (Private Treaty Sale) – UK Average Timeline (15 – 29 weeks)
National Residential Sales Options – Average Timescales (7 Days – 12 weeks)
If you are a landlord, property investor or selling a 2nd or inherited home, call us today to find out how we can help you sell fast and solve problems.
Phone us on 0800 612 8659 to discuss ways that we can help you save money on capital gains tax and sell buy-to-let properties or send us your details using our contact form 24/7 and we will phone you back ASAP in office hours (or at a time to suit you).
Parts of the information above (inc the example scenario) is taken from a report on Capital Gains Tax written by Which? To see the article in full, please see Which?