In this edition, we focus on Capital Gains Tax (CGT) on UK residential property.
Capital Gains Tax (CGT) continues to be a key consideration for landlords, property investors, and homeowners alike. With tight reporting deadlines and higher tax rates for residential property, careful planning has never been more important.
Capital Gains Tax on Residential Property - The Basics
CGT may be payable when you sell, gift, or otherwise dispose of a UK residential property that is not your main home. This commonly includes:
• Buy-to-let properties
• Second homes
• Inherited properties (where the property is sold for more than its probate value)
• Former main residences that have been let or not occupied for the full ownership period.
For UK residents, gains on residential property are taxed at:
• 18% to the extent the gain falls within the basic rate tax band
• 28% for gains falling within the higher or additional rate bands
Each individual is entitled to an annual CGT exemption (£3,000 for the 2024/25 tax year), although this allowance has reduced significantly in recent years, bringing more disposals into charge.
If you sell a UK residential property and CGT is payable, you must:
Report the disposal to HMRC within 60 days of completion, and
Pay an estimated CGT liability within the same timeframe
This requirement applies even if you already complete a Self Assessment tax return. Failure to meet the deadline can result in penalties and interest, even where the tax itself is paid later.
Key Reliefs and Allowances to Consider
There are several reliefs and deductions that may reduce or eliminate CGT, including:
Private Residence Relief (PRR) - for periods when the property was your main home
Lettings Relief - now available only in limited circumstances where the owner lived in the property at the same time as the tenant
Allowable costs- such as purchase costs, legal fees, and qualifying improvement expenses.
Correctly identifying and evidencing these reliefs is crucial to ensuring you do not overpay tax.
Get in touch with us today to discuss how we can help you navigate CGT, don't wait, book a consultation.
Planning Opportunities
With the right planning, CGT exposure can often be reduced. Common strategies include:
• Timing disposals across tax years
• Utilising both spouses’ CGT allowances where appropriate
• Reviewing ownership structures before sale
• Ensuring improvement costs are properly documented
Early advice is key—many opportunities are lost once contracts are exchanged.
How We Can Help
Our accountancy team can assist with:
• CGT calculations and 60-day return submissions
• Reviewing eligibility for reliefs and exemptions
• Property tax planning and structuring advice
• Ongoing compliance through Self Assessment
If you are considering selling a property or have recently completed a disposal, we recommend seeking advice as early as possible.
Get in touch with us today to discuss how we can help you navigate Capital Gains Tax and ensure you remain fully compliant while minimising your tax liability.
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