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Capital Gains Tax when selling a home

Will you have to pay tax when selling your home or other property? The short answer is, it depends. Read on to find out if you’ll have to pay capital gains tax, and if this is the case, how you might be able to reduce your tax bill.

capital gains tax when selling a home

What is capital gains tax and when do I pay it on my home?

Capital gains tax (CGT) is payable when you sell an asset that has increased in value since you bought it. The rate varies based on a number of factors, such as your income and size of gain. For residential property it may be 18% or 28% of the gain (not the total sale price).

Usually, when you sell your main home (or only home) you don’t have to pay any CGT. However, in some circumstances you may have to pay some. For example:

  • The home includes a lot of land/additional buildings (5000 square metres or more)
  • You’ve sub-let part of it (but having one lodger doesn’t count)
  • Part of your home is exclusively business premises
  • You bought it just to make a gain (e.g. if you are a property developer)
  • You have another home that could be considered your main residence

Some of these points may be open to interpretation and dispute, so if you are in any doubt it is sensible to seek advice. An independent financial adviser can give you their unbiased view on whether your home will be exempt from CGT.

Find a local independent financial adviser through our partners at unbiased. Click the button below and complete a short form to be connected with local advisers 

What is the capital gains tax allowance?

You only have to pay CGT on gains that exceed your annual allowance. This is currently £12,000 per person. This means your property can increase by this amount before any CGT will be payable on the sale.

Selling your home? Find your best local estate agent based on how quickly they sell and how often they achieve asking price 

Do I pay capital gains tax on my second home?

If HMRC decides that a property isn’t your main residence, you will have to pay CGT on any gain in its value above your CGT allowance.

Do I pay capital gains tax on buy-to-let property?

If your buy-to-let property has risen in value by more than your CGT allowance by the time you sell it, you’ll have tax to pay.

Do I have to pay capital gains tax on inherited or gifted property?

If you give a property to your spouse or civil partner, or to a charity, there won’t be any CGT to pay.

If you inherit a property (and any inheritance tax due has been paid by the estate) then there won’t be any further tax to pay until you sell the property. The gain will be measured from the date at which you acquired the property.

If you sell a property that was occupied by a dependent relative, then you may not have to pay CGT. Ask your adviser about this.

How do I calculate my capital gains tax bill?

Working out exactly how much CGT you have to pay means doing a few sums.

If you’re a higher-rate taxpayer, it’s quite simple. Just subtract your CGT allowance from your gain, and your bill will be 28% of the remainder.

If you’re a basic-rate taxpayer, it’s a bit trickier. You’ll need to work out if your gain-minus-allowance will lift your income into the higher-rate band. Everything above the band will be taxed at 28%, while everything below it will be taxed at 20%. Your adviser can help you calculate it accurately.

N.B. These figures are based on selling a residential property. Other assets may be calculated differently.

When do I have to pay my capital gains tax bill?

If you have capital gains in a particular tax year, you should apply to submit a tax return if you don’t do so already. HMRC will then bill you for any outstanding CGT, which you will need to pay by the end of that tax year. Bear in mind that the gain will usually be dated from your exchange of contracts, rather than completion – so beware if these fall in different tax years.

How can I reduce my capital gains tax bill?

There are various ways you can minimise or even eliminate a capital gains tax bill.

  1. Don’t forget your spouse’s allowance

Remember that everyone has a CGT allowance, so if you are the sole owner of a property, you can double your allowance by sharing ownership with your spouse.

  1. Note the different CGT bands

Basic rate taxpayers pay lower CGT, so if you are higher-rated and your spouse isn’t, you could reduce your CGT bill by transferring all or part of the property into their name. Ask your adviser about the most efficient way to do this, to make best use of both your allowances.

  1. Time your sale carefully

If you have used up some or all of your CGT allowance for a particular year, consider delaying the sale of your property to the next tax year.

  1. Nominate the property as your main residence

If you own several properties and wish to sell one, you may be able to reduce or eliminate the CGT bill by nominating it as your main residence in advance. The rules on doing this are fairly strict, so talk to your adviser about how to do this properly.

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  1. Hi
    I am in the process of selling my buy to let house.
    I am now retired. I will make around 150k profit.
    Will I have to pay tax if so how much ??
    Kindly let me know ASAP.
    Mahmuda Mirza

    Comment by Mahmuda Mirza — August 24, 2020 @ 10:19 am

  2. Hi, just wondering, I buy a home lets say for argument sake worth £250000. I cut part of its garden off to sell as land for £100,000. this is my only main residence.
    So 2 options after getting planning permission.
    either sell the property with planning but put the property price up to lets say £330,000
    or sell the land ,if i sell the land i realise i will have to pay 18% CGT, so if i am on £20,000 per year PAYE will i need to pay anything extra.
    Would I be better off selling the property with planning permission from a tax point of view,hope ive explained this well enough.

    Comment by Ash — July 15, 2020 @ 2:27 pm

  3. I sold property. Got advance payment in one financial year and signed the agreement. Final payment came in second financial year. Do I consider capital gain tax in two financial years on the amount got in each financial year.?

    Comment by Yatendra — June 22, 2020 @ 10:43 am

  4. How is the value of a self-built sole property assessed if it is then sold less than 12 months after its occupation? Is there a CG to pay?

    Comment by Tony Parrini — June 3, 2020 @ 2:57 pm

  5. If I move into an inherited home will I have to pay CGT on my exisiting home when I sell it?

    Comment by jacqueline Russell — June 2, 2020 @ 12:35 pm

  6. hi

    I’m not due to pay CGT do I still need to complete a self assessment. I’m under the threshold.

    thank you

    Comment by C sweeney — May 14, 2020 @ 1:47 pm

  7. Hi,

    I am selling our only property but have rented it out in the past. I believe I am still due to pay tax on the profit?

    My wife isn’t on the deeds so I could put her on but concerned the tax man will see this as tax evasion, given we should exchange very soon.

    Ive work from home 2 days a week for years. Is there any allowance for a home office for a PAYE employee?

    Any advice please?

    Comment by Jon — March 30, 2020 @ 10:25 am

  8. If your rental property has risen in value by more than your CGT allowance by the time you sell it, you’ll have to pay CGT. You should speak to a financial advisor about this to see if there is any way of reducing your potential tax liability – you can find a financial advisor by using the link in our guide above.

    Comment by HomeOwners Alliance — March 2, 2020 @ 1:03 pm

  9. I own only one home but am living elsewhere and it is rented out. If I sell it, will I be liable for CGT?

    Comment by Patrick Tomes — March 2, 2020 @ 9:33 am

  10. My father has gifted his house to me as he now is in care I will be putting the house up for sale this year hopefully selling for around 80k will I have to pay CGT if so how much?

    Comment by Mick — January 30, 2020 @ 8:07 pm

  11. I have a BTL/2nd home that I purchased in 2011. I never really planned for it to be a BTL when I bought a house in 2013 but I suppose I have enjoyed some perks from it in that time.

    I am now looking to sell. It is held in my name and would therefore trigger the 28% banding of tax. However my wife does not work, could I transfer this to my wife’s name before selling to trigger the lower rate of 20%?

    The taxable amount seems pretty clear, and should imagine just one of those things you need to pay….

    Comment by Andrew Lipscombe — November 28, 2019 @ 11:44 am

  12. I am considering selling my second home which will be at a profit but reinvesting in a another home do i pay capital gains at this point or wait until I actual make a gain?


    Comment by Mike Kilraine — November 18, 2019 @ 6:41 pm

  13. Trying to judge whether to sell my btl flat this tax year or the next tax year and to how the changes could affect the costs, so if I sold next year after April will it cost me a lot more money?
    Purchased in 2004 163.500, became an accidental landlord. Worth currently 295.00-300.00

    Comment by Martin — October 1, 2019 @ 12:53 pm

  14. I bought a house in 1983 and lived there full time until 2015. My wife continued to live there until it was sold in May this year. Am I liable to pay any CGT and if so how is it calculated? Michael Cousens

    Comment by Michael Cousens — September 13, 2019 @ 11:10 am


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