Do I have to pay Capital Gains Tax When I Sell My House?

Capital Gains Tax (CGT) is a tax levied by HMRC on gains in value realised on disposal of an asset. Most personal assets are covered except your private car or any asset worth less than £6,000.

Whilst the sale price is usually a good guide, HMRC may look at the ‘market value’ rather than the actual sale price if the former is considered too low.

At the time of writing the rate of tax payable is either 18% or 28% of the net gain (after allowances and costs) depending on your income tax band, although there are several exemptions to Capital Gains Tax, the most pertinent of which in this context is the exclusion of your main domestic residence. This is called Private Residence Relief.

To qualify for this relief, which is automatic, you should meet the following criteria;

  • you have one home and you’ve lived in it as your main home for all the time you’ve owned it
  • you haven’t let part of it out – this doesn’t include having a single lodger
  • you haven’t used part of it for business only
  • the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
  • you didn’t buy it just to make a gain

You can write to HMRC and nominate a main residence for tax purposes. Most private homes are, therefore, exempt from Capital gains Tax for UK residents.

Your main home is usually a property that you have lived in as your main residence. The definition for which home you elect to be your main home can be complicated and we suggest you take specific tax advice on this matter if you are unsure.

No matter how many homes you own or where you lived at the time, currently, you always get relief for:

  • the last 18 months before you sold your home
  • the first 12 months you owned the home if it was being built, renovated or you couldn’t sell your old home

You must have lived in the home as your only or main residence at some point while you owned it. You get relief for these periods even if you nominated a different home as your main home. In the event that you have to pay CGT, you are allowed to deduct certain costs from any gain before tax and each beneficiary of the capital gain also has a personal tax free allowance every year to put against taxable Capital Gains.

Whilst we are able to provide advice on the sale of your home, we thoroughly recommend you take specific advice on this subject. In the first instance contact us for a chat.

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