Capital Gains Tax: What Property Sellers Need to Know

Understanding CGT is crucial when planning to sell a property

This tax applies to the profit you make when selling a property that is not your primary residence, such as a second home, rental property, or a buy-to-let investment. Understanding how CGT works can help you avoid any surprises when it comes to your tax bill.

The first thing to note is that CGT is calculated on the profit you make from selling the property, not the full sale price. This means that if you bought a property for £200,000 and sell it for £300,000, your taxable gain would be £100,000. However, you can reduce this gain with allowable costs, such as the purchase price, improvement costs (not maintenance), and any professional fees like solicitor or estate agent costs.

In some cases, you may qualify for exemptions that reduce or eliminate CGT. For instance, if the property you’re selling has been your primary residence for the entire period of ownership, you may be eligible for Private Residence Relief, which can exempt you from paying CGT altogether. However, if the property has been used for rental purposes or as a second home, you may not be eligible for this relief.

It’s also important to keep track of your annual CGT allowance. Each tax year, there is a tax-free allowance for gains made, known as the annual exempt amount. For the 2025/2026 tax year, this amount is set at £12,300, meaning any gain below this threshold won’t be taxed. If your gains exceed this amount, CGT will apply to the excess.

Understanding CGT is crucial when planning to sell a property. If you’re uncertain about your liability or want to ensure you’re fully compliant, it’s wise to consult with a tax advisor or an experienced estate agent. They can help you navigate the complexities of CGT and make sure you’re well-prepared for the sale.

Ready to make your next move? Contact us today to discuss your property sale and how we can help.

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