What is UK Rental Property Capital Gains Tax? It is important to understand how Capital Gains Tax (CGT) for landlords works in the UK when you sell a buy-to-let, and what you must pay HMRC. Landlords and investors must be aware of the types of property tax paid to HMRC when owning a buy-to-let. CGT needs to be calculated and paid to HMRC on time. Use our free online Capital Gains Tax calculator to see how much you need to pay HMRC when selling a residential buy-to-let property (or second home) What are the basics of UK Rental property CGT? Capital Gains Tax (CGT) must be paid on any profits you make when you sell an asset, such as property, that has increased in value. CGT is due to HMRC on the profit you make, not the full amount you sell an asset for. The UK’s CGT is subject to an annual tax-free allowance of £6,000 in the 2023-24 tax year. Married couples and civil partners who jointly share an asset can combine their allowances in the UK, making their total CGT allowance £12,000. Buy-to-let (BTL) you sell in the UK may incur CGT on any profits made. If the UK property you are selling is your main residence, this is exempt from Capital Gains Tax due to Private Residence Relief (PRR). Any other BTL that you sell, such as a buy-to-let investment or second home, is subject to CGT. You may need to pay CGT to HMRC if your main home is partly used as a business premise, or if you lease out part of that UK asset. What are the rates on UK buy-to-lets? In the UK, you pay HMRC higher rates of CGT on a BTL than other assets. Basic-rate taxpayers pay 18% on any gains they make when selling buy-to-lets, while additional rate and higher-rate taxpayers pay 28%. Any capital gains will be added to your other income sources when working out which income tax bracket you will be in for the year. This could push you into a higher tax bracket on your UK income for HMRC purposes.. You cannot carry over any unused CGT allowance into the next year. If you don’t use it, you lose it. To work out your gain on UK BTL when selling, you deduct the amount you paid for the asset from the sale price. You can also deduct any legitimate costs of buying and selling the UK buy-to-let. This includes broker fees, stamp duty, and specific improvements made while you owned it. You can also offset losses you’ve made when selling other assets. If you owned several properties and made a £30,000 loss when selling one of them, you can use that against the gains you make from another property to reduce your overall CGT bill to HMRC. Any losses should be claimed on your self-assessment return to HMRC. Find out more about Capital Gains Tax rates in the UK. When must I pay to HMRC? For UK buy-to-let sold after 27 October 2021, you must pay any CGT owed within 60 days of the completion of the sale or disposal in the UK. You do this by submitting a ‘residential property return’ and making a payment on account to HMRC. How do I avoid paying it? You won’t need to pay CGT for the time is was your main residence, plus the nine months of ownership even if you weren’t living in the house during those nine months. People with a disability or those who move into a care home can claim for up to the past 36 months of ownership. If you use more than one house, you can nominate which one will be tax-free for CGT purposes. It doesn’t have to be the one where you live most of the time. It makes sense to nominate the property that is expected to make the largest gain when you sell it. You do not get relief if you bought your house just to sell it and make a gain. Some of the ways you can avoid paying CGT on UK house or reduce your bill from HMRC include: – Consider joint property ownership with your spouse – Utilise lower CGT rates where possible – Time the property sale carefully – Nominate your property as your main home – Deduct eligible costs It is worth talking to an accountant beforehand. FAQ What exactly is capital gains tax UK, and how does it differ from other forms of tax? Capital gains tax UK is a tax on the profit made when selling or disposing of an asset that has increased in value. It's distinct from income tax as it applies only to the gains or profit, not the total amount you receive. I've recently sold my property. What capital gains tax on property rules should I be aware of? When selling property in the UK, capital gains tax property rules dictate that you may need to pay tax on any profit above your tax-free allowance. Factors like whether it's your primary residence, if you've let it out, or if it's a second home can impact the tax amount. 've heard of cgt property. Is this different from capital gains on property? "CGT" stands for Capital Gains Tax. So, cgt property refers to the capital gains tax associated with property. Essentially, cgt property and capital gains on property are terms addressing the same concept, the tax you owe from the profit of selling property. What's the current capital gains tax rate in the UK, and does it vary? The capital gains tax rate in the UK varies based on the type of asset and the taxable income. Different rates of capital gains tax apply for basic-rate taxpayers and higher-rate taxpayers. It's always a good idea to check the most recent rates and consult with a tax advisor. I'm selling a home that was gifted to me. Are there any specific rules for capital gains tax on selling a gifted property UK? Yes, when selling a gifted property in the UK, special rules apply. The cost base for calculating the gain might be the property's value when it was gifted to you, rather than when originally purchased. It's essential to keep detailed records and possibly seek professional advice to ensure you're calculating and paying capital gains tax correctly.