Selling Property: Capital Gains Tax & Private Residence Relief
When selling UK property, you will be liable to pay Capital Gains Tax (CGT) if you make a gain. Your gain is usually the difference between what you paid for your property and the amount you received when you sold it, though some additional costs may also be deductible. If your combined capital gains are over your annual allowance, you’ll have to report and pay CGT within 30 days of completion.
You may have to pay CGT if you make a profit (‘gain’) when you sell (or ‘dispose of’) property, for example:
- buy-to-let properties
- business premises
- inherited property
There are different rules if you:
- sell your home
- live abroad
- are a company registered abroad
You’ll need to work out your gain to find out whether you need to pay tax.
What is private residence relief?
Private residence relief allows most homeowners to sell their homes without being liable for any CGT on property profits. Private residence relief may also help you reduce your CGT liabilities when selling a second home or selling off part of your garden.
Without the relief, you would normally have to pay CGT on any gain you make if you dispose of:
- a dwelling house (which can include a house, flat, houseboat or fixed caravan) which is your home
- part of a dwelling house which is your home
- part of the garden attached to your home
However, you’ll usually be entitled to full relief where all the following conditions are met:
- the dwelling house has been your only or main residence throughout your period of ownership
- you have not been absent, other than for an allowed period of absence or because you’ve been living in job-related accommodation, during your period of ownership
- the garden or grounds, including the buildings on them, are not greater than the permitted area
- no part of your home has been used exclusively for business purposes during your period of ownership - this includes working from home using a room that is not exclusively used for business purposes
If you’ve made a loss on the disposal instead of a gain:
If you make a loss on the disposal of your home and you would have got private residence relief if you had made a gain, your loss will not be an allowable loss and you will not be able to offset it against any gains you’ve made. If you would have got partial relief, part of your loss will not be allowable, and that part should be calculated in the same way as you would have calculated the partial relief if you had made a gain.
Who qualifies for relief?
Any individual is entitled to the relief on the gain arising on the disposal of their only or main residence, subject to meeting the conditions.
CGT for non-residents on UK residential property
From 6 April 2015 if you sell (or dispose of) the whole or part of an interest in a UK residential property when non-resident, you must tell HMRC within 30 days of the date of completion. You may have to pay CGT on any gains you make. You can find more information on this in Capital Gains Tax for non-residents: UK residential property.
If you have any questions on calculating private residence relief or CGT please get in touch with our Tax Partner, Robin Stevenson who will be able to advise you further.
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