Chadwick Accountants
If you own a second property and sell it for a profit, you’ll almost certainly hit the radar of our friends at HMRC. And what they’ll be looking for is Capital Gains Tax (CGT) - their share of your gain. But don’t worry: with a little planning and record-keeping, you can make sure you don’t pay a penny more than you have to. Here are some FAQs…
What’s the CGT rate on property?
As of the 2024/25 tax year, basic rate taxpayers pay 18% on gains from residential property. Higher and additional rate taxpayers pay 24% on those gains. So, if your total taxable income plus the gain on the property pushes you into the higher-rate band (over £50,270), you’ll pay the higher CGT rate on the portion above that threshold.
How do I reduce my tax bill?
Keep your receipts. One of the most effective ways to lower your CGT liability is to track every improvement you’ve made to the property. We're talking new kitchens, upgraded bathrooms, extensions, re-roofing: anything that adds value or enhances the property. These costs can be added to your "base cost" of the property, reducing the size of your taxable gain.
Can I deduct the cost of general maintenance?
Put simply, no. Nor can you submit anything you’ve already claimed as an expense through Self Assessment. Improvements only. And you must not have claimed them as revenue expenses.
What if I used to live in the property?
A lot of people don’t realise this, but if you ever lived in a property as your main residence, even just for a short time, a portion of the gain might be exempt under Private Residence Relief (PRR). The gain is apportioned over the total period of ownership. And the period you lived in it (plus the final nine months of ownership, even if you weren’t living there then) is usually exempt from CGT. But here’s the catch: most people rent out the property for longer than nine months, and that means part of the gain will be taxable.
Surely HMRC won’t know?
But they do, as they have access to Land Registry data, so they know which properties are in your name and when you sell them. If you’ve sold a property that’s not your main residence, expect a letter. You might get away with it for a little while, but rest assured, the taxman will catch up eventually. And the worst part? Many people have already spent or reinvested the proceeds by the time the tax bill arrives.
So can you avoid CGT?
In short: not really. But what you can do is plan for it. Know the rules, understand your position, and set some of that lovely profit aside before HMRC comes knocking.
Need help working out what you owe?
Don’t leave it to chance: get a clear CGT estimate before you sell. Give us a call on 01789 773 182 or email [email protected] and we’ll help you figure out what slice HMRC will be expecting.
