What You Should Know About Capital Gains Tax And Your Property

If you own an asset, such as a property, you may face a Capital Gains Tax liability when you sell it.

However, Capital Gains Tax doesn’t apply to all property.  So, our handy guide explains everything you should know about Capital Gains Tax and property.

What is Capital Gains Tax and when is it paid?

Capital Gains Tax is a tax on the profit or gain that you make when you sell or otherwise dispose of an asset.   Disposing of an asset means that you sell it, give it away as a gift, exchange it for something else or transfer ownership of it to someone else.

Capital Gains Tax is paid on the gain that you make between purchase and disposal.  It is not charged on the amount of money you receive for the asset – just the gain.

When you sell or otherwise dispose of property – such as a building, land or lease – you’ll usually have to work out if there’s any Capital Gains Tax to pay.  However, you don’t normally pay any Capital Gains Tax on any gain made on your own main residence (see below).

Property that normally incurs a Capital Gains Tax liability on any gain being made includes:

  • A second home in the UK or abroad
  • A property you bought as an investment
  • Business premises
  • Land

Capital Gains Tax on your own home

As long as you’re entitled to full Private Residence Relief, you don’t have to pay Capital Gains Tax when you sell or dispose of your own home.

You must have used the property as your only or main residence throughout the time you’ve owned it. You may also have to meet other conditions.

Selling or giving your property to family

If you sell, give or otherwise dispose of a property to your spouse or civil partner you don’t pay Capital Gains Tax as long as you’ve lived together for at least part of the tax year in which you made the disposal.

However, if your spouse or civil partner later sells or disposes of the property, they’ll have to work out the tax due.  You should keep a note of what you paid for the property as your spouse or civil partner may need this to work out their Capital Gains Tax liability when they sell or dispose of the property.

If you give away your home, for example to one of your children, you don’t have to pay Capital Gains Tax as long as you’re entitled to full Private Residence Relief.  However, your child may have to pay Capital Gains Tax when they sell or dispose of it.

If you dispose of a property (that’s not your main residence) to any other family member – or to a spouse or civil partner that you haven’t lived with during that tax year – you’ll have to work out the gain or loss made and any Capital Gains Tax due.

Buying and selling property as a business

If you buy and sell property as a business, you pay Income Tax on any profits that you make, not Capital Gains Tax.  Any profits that you make will have to be declared on your Self Assessment tax return.

However, if your property trading business operates as a limited company, profits on the sale of property assets will form part of the company’s profits.  These will then be subject to Corporation Tax.

39 comments

  1. Nicola McKie says:

    Hi, I have just sold a commercial property which I inherited ( all tax paid), and thought I was due to pay capital gains on it, but have been told by an accountant that as it is my only property I am not liable. I understood that it was only residential property on which there was a relief,who is right? Many Thanks, nikki

  2. Jacqueline Hobbs says:

    I divorced 14 years ago. We have a consent order that triggers me giving my ex 20% of property. He has never enforced this as both feel that it was a mistake. The trigger event occurred 7 years ago .we both want to get his charge removed from the deeds and he doesn’t want the money basically he is giving it to me. I have paid the mortgage since he left and it is in my name.Aapparently if he does this he is liable to CGT! The property was transferred to me when the consent order was set up. He is willing to get all the forms signed but he says I will have to pay the CGT

  3. B Filzek says:

    If I rent when I return to UK rather than live in my own home, then sell my home will I be liable for capital gains tax?

    • DavidTaxFix says:

      Do you not pay capital gains tax on your primary principal residence and the final 3 years of your residency in your house, applies regardless of where you are living. You can read more here.

  4. Mike Harvey says:

    I want to let out our home and remortgage as a BTL mortgage for 2 years and buy another home. After the 2 years I want to move back in and use it as my main residence and let out the second home that I bought and remortgage the first house as a residential again.
    Will I loose my CGT / Private Residence relief for the first home by letting it out for 2 years?
    I had it since 2000 and by letting it out and buying a smaller place I can release equity.

    On the second home, will I get any CGT allowance?

    thanks
    Mike

  5. Lawrence says:

    If the gifted property from my parent is my main residence, am I liable for capital gains tax when I sell it eventually

  6. Andy H says:

    Hi, my nan went into a care home from 2003-2008 until she sadly passed away. My nan signed over her property to my father in 2004. (My father already owns his own house with my mother). I obtained a mortgage to purchase the house that was signed over to him off him a year later in 2005. The property was valued at £110,000.00 and i purchased it for £65,000.00. Nobody was living in or renting this property and was vacant until i purchased it and moved in in 2005. I lived in this house for 4years then sold it to buy my current property i live in now. Does anyone owe any Capital gains tax or inheritance tax as i received a letter from HMRC saying i might be liable?

  7. Louehall says:

    I bought a second property in 2008 and sold it 3 months later, I barely made £1000 profit after all the fees and costs. Will I be eligible for capital gains tax? I was not working at the time or receiving an income.
    Thanks

    • TaxFix says:

      Louehall: Did you have any other capital gains in the year? If not, then the gain will be below your capital gains allowance and there will be no tax CGT tax to pay.

  8. A kirk says:

    If I give my wife full ownership of the home that we shared, and I live and own in another property, will I have capital gains tax to pay, I haven’t lived in the property for 12 years.

  9. Dawn says:

    20 years ago i helped my mother buy her bungalow (we paid half each) and she has lived in it ever since. I have my own house and have never lived in the bungalow. She is now getting older and I wonder if when the time comes and we have to sell the bungalow will i be liable for capital gains tax on any profit from my half?

  10. M lyons says:

    Please could you tell me what the CGT liability is on the following:
    House purchased for £200000 in oct 2000 resided in as main dwelling until April 2004
    Rented out from April 2004 to July 2008 then resided in as main dwelling until Dec 2011 when sold for £500,000. Higher rate tax payer and £40k spent on improvements.

    Many thanks.

  11. dave says:

    i bought a house 20 years ago and now ready to sell. we are investing 25 percent of the proceeds into another property to which my daughter owns and we are going to continue paying a low rate morgage on that property. are we liable to capital gains tax on the property we sell if we put the surplus £100000 into a bank

  12. Mary Horsfield says:

    I am selling my own house and moving temporarily into the house I inherited from my parents. When I sell that house, do I have to pay Capital Gains Tax, as it will then be my only home?

  13. missy says:

    I have a house I had purchased twelve years ago,seven years ago I sold off my back lot,which was my property,when i filed my taxes they hit me with a huge capital gains tax,I was shocked. should I hve paid this?

  14. Jules says:

    Can my parents sell me their home, legally for a peppercorn contract to me. House worth say 170K will their be any future liabilities to either party.

    Thank you

  15. Graham says:

    Will we have to pay capital gains tax on second property bought 17 yrs. ago.

  16. lambert says:

    i am separated from my wife. she has recently died. the house was in joint names. if sold is capital gains tax due.

  17. Irena Modeer says:

    Hi, I have just bought a property in UK but I am a Bulgarian and live and work in Bulgaria. I will visit UK not more than 60 days per year. Am I considered an UK tax resident and do I need to pay any tax on the money I spent there including the purchase of the property. Thank you in advence!

  18. Mrs E S Brown says:

    I married for the second time in 2004. He moved in to my home and built on an extension. He worked from home. We divorce in 2011 and I end up buying him out of my home (at a premium!). If the property market soars… will I now be liable for his CGT??

  19. Christine says:

    I have been living in the house that was my parents before they divorced for 21 years and have been paying a peppercorn rent. My mother who is now a widow from a second marriage owns her own house and a business as well as my home am I in danger of losing my home when my mother dies because their will be so much capital gains tax to pay.

  20. Victoria says:

    If I make do not make a profit selling my second property will I be liable for Capital Gains Tax?

  21. Julienne Collinson says:

    Bought a flat I lived in from 1999 to 2006 and could sell it when I move in with my boy friend. so rented it our when I could but now have no choice and am selling at market rate. Will I have to pay any CGT the value has actually gone downsince I moved out.

  22. Jenny Rawlings says:

    What is Full Private Residence Relief and how do I know if I have it?

  23. S lee says:

    Would we incur capital gains tax if we sold our property to our daughter and her partner at a reduced price? We bought the property 30 years ago so obviously the property has increased in value since we purchased it. We now wish to purchase a bungalow and they wish to buy our home which they love. How do we go about this as what we thought was simple is now so confusing

  24. Lucy Jordan says:

    My husband and I bought a house together – we seperated and he bought another house with his new partner. We are now selling this house, does he pay catital gains? He doesn’t live in the house we are selling.

  25. Sue Ranford says:

    If I sell my investment properties with the intention of buying others with the proceeds, am I liable to pay capital tax

  26. Bill McLeish says:

    I took early retirement two years ago and moved to Manchester to live with my partner. I’ve since been renting out the flat that I own in Glasgow. If I sell my flat in the near future will I have to pay capital gains tax on the profit. I have lived in it since 1994 until 2010.

    If Yes – and I moved back into my flat for a while before selling – would I still need to pay capital gains tax when I sell it.

  27. karen smith says:

    do we have to pay capital gains on our main house if we sell it we were gifted it and it stands in 3 acres of land

  28. Alec says:

    I cannot sell my house (A), but will buy another one to live in (B) and will rent out A. Is there a CGT sliding scale when I come to sell house A ?ie lived in 11 yrs vs rented out 2 yrs. CGT to pay 2/11 of gain, or other such calc ?

  29. lucy says:

    my sister has lived with my mum for 30 years. my mum signed the house over to both of us. my mum has since died and my sister still lives there. When we sell it will i have to pay capital gain

  30. Laurence says:

    I bought my house in july 2001 and sold it in january this year. I lived in it as my main home
    except for three years when I rented it out. For the first eight months I was in living in my employers accommodation in 2007. After that I changed jobs and rented it out for the remaining term of up to three years. I then lived there until it was then sold. Am I liable for capital Gains Tax?. HMRC have told me that I would not be
    but because I did not live back at the property
    after the eight months of living in employer
    accommodation this period would not be exempt from CGT. I have made a gain of around £35k on the sale but have done a lot of work on the house
    What if any CGT would I have to pay?.

  31. Mr Parker says:

    My Father had a freehold shop & flat premises,
    he bought in 1984, he found out that on 13th april 2006, if he sold this property for £200,000 the taxable gain was £50,000.
    But this amount would reduce the longer he kept the premises,
    5th april 2007 the tax would be £14,000
    and then a year later £11,000, then a year later £8,000, then £5,000, and then £2,000, and up to 2011 nil to pay!
    But two years ago my father signed the property,with no mortgage anymore,over to myself & my brother,as a gift! does this mean we have to pay capital gains tax.

  32. mrudula says:

    A surgery (commercial property) rented at the moment. if i give it to my 2 daughters , any tax to pay , if they decide to sell in near future?

  33. TaxFix says:

    Omar: If you are leaving the UK you will be able to claim a tax rebate. When you finish working you should be given a P45. When you have this your can make your claim here. You won’t be able to claim back all of your tax for the last 12 years, as the deadline has passed.

  34. TaxFix says:

    Craig: If you earn below the tax free allowance, £8,105 for the 2012/2013 tax year, you will be able to claim back all the tax that you have paid.

  35. TaxFix says:

    Damon: Your previous employer is required by law to provide a statement of earnings. Maybe you can remind them of this obligation.

  36. TaxFix says:

    Sam: If you earn below £8,000, you will be able to claim back all of your tax.

  37. TaxFix says:

    Deborah: If you have left the UK you can claim an income tax refund but not a national insurance refund. When you finished working you should have been given a P45 from your employer. When you have your P45, you can make your claim here.

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