Capital Gains Tax on property

Generally, there is no Capital Gains Tax (CGT) to pay on the sale of your home, but there are some potential pitfalls to be aware of

When Capital Gains Tax on property applies

If you own more than one property, the second one will be liable to tax. If you use more than one property personally you can choose which property should be considered as your home by making an election. There is a two year window from the acquisition of the second property to make the election but this can be refreshed each time there is a change in property holdings.

I own one property

It may not be plain sailing even if you only own one property. If you use part of your home for business purposes, or if the garden and grounds for your property exceeds 0.5 hectares, CGT can be due.

The exemption from CGT on your home applies to the periods in which you occupied the property. Periods of absence can be deemed to be occupation in certain circumstances, for example if you are required by reason of your employment to live away from your home. One of the important periods of deemed occupation has been in relation to the final period of ownership which reduced from 6 April 2014 from 36 months to 18 months, although the 36 months rule may still be relevant for those who are disabled or live in care homes.

Considering a redevelopment project

In areas where there is a shortage of land for new developments it has been increasingly popular for individuals to sell part of their garden to allow for a development, or even to demolish their home and build two properties on the same plot. Usually one is retained and the other is sold. Such arrangements need careful planning to avoid an unexpected tax liability. If you have a plan to do this, please talk to us about avoiding tax pitfalls.

CGT property
Moving overseas

If you moved overseas before you sell your home then capital gains may still apply. Even if you are non-resident at the time of sale. Most importantly, there is a 30 day reporting requirement which you must meet.

Letting relief

However it’s not all bad news! If a gain arises when you sell your home which relates to periods in which the property was rented out, letting relief can apply to reduce the remaining chargeable gain. Letting relief provides a further exemption of up to £40,000.

For more information

For more information regarding Capital Gains Tax on property, please contact a member of our tax team:

01483 416232