What Can You Deduct from Capital Gains Tax on Property? Are you aware of the allowable deductions for Capital Gains Tax on property in the UK? This article breaks down what you can deduct to minimise your tax liability. Our team of property tax experts can help you to identify all the relevant allowable deductions for Capital Gains Tax. Once you know all the allowable deductions you can claim against Capital Gains Tax, this will help you to keep more rental income. What are the basics of Capital Gains Tax on Property? As a property accountant with an expert team that manage 1,000s of landlords’ tax affairs, I appreciate that it can be confusing to navigate allowable deductions for Capital Gains Tax on property in the UK. If you are thinking of selling a property it is important to understand what are allowable deductions to offset against Capital Gains Tax. Capital Gains Tax (CGT) is the tax paid when you make a profit from disposing a property that has increased in value. Disposing of an asset such as a property usually means selling it, gifting it, swapping it for another, or being compensated for it due to loss or damage. The tax you pay is on the gain (the difference between what was paid for the property and what it was sold for) rather than the property’s overall value. Capital Gains Tax is usually due on property that isn’t your main residence, or on your main residence if you have let it out or used it for business. Capital Gains Tax applies to any property you own that isn’t your main residence. This includes buy-to-let properties and second homes. Capital Gains Tax only applies when you dispose of the property. If you inherit a property from a family member, you’ll only be liable for Capital Gains Tax if and when you sell it. If you live in your main residence and haven’t let it out or used it solely for business purposes, you should be exempt from Capital Gains Tax. To be exempt from Capital Gains Tax you must have lived in your home for the entire time you’ve owned it. This enables you to claim Private Residence Relief. To find out more about property taxes and allowable deductions for Capital Gains Tax on property in the UK, visit here. Are you paying too much Capital Gains Tax? I know that you don’t want to pay more Capital Gains Tax than you need to. This is why claiming all the relevant deductible allowances on Capital Gains Tax is so important. Property you sell in the UK may incur Capital Gains Tax on profits made. If the property you’re selling is your main residence, this is exempt from Capital Gains Tax. For the purposes of Capital Gains Tax, a property is classed as your main residence if all of the following apply: You have one home and have lived in it as your main home for all the time you’ve owned it You have not let part of it out (having a lodger is allowed) You have not used part of your home solely for business purposes The grounds including all buildings occupy less than 5,000 square metres You did not buy it only to make a gain I advise you to read this detailed article I have written on Capital Gains Tax for further information to help you pay less CGT on buy-to-let properties. If all of the above points apply, you will qualify for Private Residence Relief. This means you will not have to pay any CGT when you sell the property. Calculating Capital Gains Tax when selling property will depend on your income, which determines whether you are a basic rate or a higher rate taxpayer. If you’re a higher rate taxpayer, Capital Gains Tax is calculated by deducting the price you purchased the property for from the new sale price. You’ll then be left with your profit, of which Capital Gains Tax payable is 28% of that profit. Understanding allowable deductions for Capital Gains Tax on property in the UK enables landlords to keep as much profit as possible when selling properties. My team can help you to navigate allowable deductions for Capital Gains Tax. What are allowable deductions for Capital Gains Tax on property? Before you calculate your final Capital Gains Tax bill, you can make certain allowable deductions including: Private Residence Relief Costs of buying and selling the property, including Stamp Duty, solicitor fees and estate agent fees Eligible costs of improvement such as an extension, a renovation or a new kitchen You are not able to deduct property maintenance costs or mortgage interest from your tax bill. You can reduce your Capital Gains Tax bill by doing the following: Keeping a record of costs and deducting them Offset your losses from other assets Make use of the spousal £24,600 allowance Consider your spouse’s income if a lower tax rate Sell at the right time I advise you to speak to a property tax expert about allowable deductions for Capital Gains Tax on property in the UK. What you should do next It is tempting to read this article and do nothing about allowable deductions on Capital Gains Tax. I recommend that you take action, to ensure that you get the maximum benefit possible from allowable deductions on Capital Gains Tax on any property you own in the UK. Book in time here to speak to my expert property tax team today.