If you want to sell a property that isn’t your main home then you may have to pay some tax on it. Our guide looks at when you do and do not have to pay tax when you sell a house or flat.
Selling your own home
You do not have to pay any tax when you sell your own home, providing:
- The property was your only home whilst you owned it (ignoring the last three years of ownership)
- You bought it primarily to use as your own home
- You used it as your home during the time you owned it and used it only as a home for yourself, your family and up to one lodger
- The garden/grounds do not exceed 5,000 square metres including the site of the house
If you are married or in a civil partnership (and not separated) you and your spouse or civil partner can have only one such main residence between you.
Selling a property that isn’t your main home
If you sell a property for more than you paid for it then you will normally have a ‘chargeable gain’ and you may have to pay tax.
However, in the 2011/12 tax year, the first £10,600 of your total taxable gains are tax free.
Factors that you should take into account when working out the tax payable include:
- You can deduct some of the costs of buying, selling and improving the property when working out your ‘chargeable gain’ (profit)
- You can transfer property to your spouse or civil partner without paying Capital Gains Tax (if you are living together)
- Any loss made on the property could be offset against other chargeable gains you make
You should also bear in mind that if you give property or sell it cheaply to your children or to others, you may be liable to pay Capital Gains Tax.
What paperwork you should keep
HM Revenue & Customs (HMRC) recommends that you keep the following information/documents:
- Copies of valuations to calculate gains/losses
- Contracts for sale and purchase
- Evidence of the costs of purchase, sale or improvements to the property