Capital gains tax on residential properties

Capital Gains Tax on Property

If you sell a property owned personally that hasn’t been your main residence during your full period of ownership, such as the sale of a buy to let property, you may need to pay capital gains tax.

The gain is generally calculated as the difference between the purchase price and the sales price.

Costs of buying, selling and improving the property would reduce the gain and there is also an annual capital gains tax free exemption (£3,000 for the 2024/25 tax year) which can also be deducted, if not used elsewhere.

Capital gains tax would be due on any remaining gain (18% for gains in the basic rate band and 24% for gains in the higher rate tax band).

What are the changes?

If you dispose of a property and make a taxable gain, you must tell HMRC and pay any capital gains tax within 60 days of the completion date.

How to report and pay the tax

A return needs to be filed online to HMRC including details of the disposal and calculating the amount of tax to pay. To submit the return, you will need to have an individual Government Gateway account with HMRC so that you can then create a ‘Capital Gains Tax on UK property’ account.

Once the return is filed, HMRC will provide instructions on making the payment.

Due to the complex nature of capital gains tax, we would always recommend the return and calculations are completed by an accountant. If we are completing the return on your behalf, you will still need to set up the accounts as we will require your property account number.

Penalties & interest

A return would need to be filed within 60 calendar days of the completion date to avoid a penalty and interest will also be charged on any tax remaining unpaid after 60 days.

In preparation of the property sale

There are a few things you can do in advance of the sale to help speed things along:

• Find out all the relevant information including the original purchase completion statement, costs of purchase such as stamp duty and legal fees and details of any capital improvements

• Put together a list of dates for when you lived in the property

• Put together an estimate of your personal income for the year - this will be needed to determine the tax rate on the gain

• Obtain your property tax account number by first setting up a Government gateway account if you don’t already have one and then creating your property tax account