Capital gains tax on the disposal of an asset can be complicated to calculate as there are several tax reliefs and exemptions to consider. In case of property sale, the applicable reliefs may be Principle Residence Relief (PPR), Letting Relief, Rollover Relief and Gift relief, etc., which can significantly reduce the capital gains tax payable or defer it to a future date. Therefore, you must correct your calculations to ensure maximum tax savings.
However, if your property was used as the main residence for part of the ownership period and was vacant or let for the other part of the ownership period, you may be liable to pay capital gains tax on property. In such a situation, you will get relief for the period you lived in the property, called Principle Private Residence (PPR) Relief. If you have let the property for part of the ownership period, you may be eligible to get letting relief.
There are specials rules to calculate capital gains considering the following:
This requires a detailed analysis of the individual case to calculate the reliefs such as Principal Private Residence Relief (PPR) and letting relief. This will in many cases either significantly reduce your capital gains tax or even eliminate it completely.
Generally, individuals who are not residents in the UK do not pay capital gains tax on the disposal of their property. However, there are some rules changes; therefore, from 6 April 2015, non residents are chargeable to UK capital gains on the direct disposal of UK residential property under the NRCGT rules. For more details on this, please click on this link
You can give your property to your loved one, whether it is your spouse, a child or someone else. If you gift your property to your spouse, there is no capital gains tax payable. The disposal of the property is deemed to take place at ‘no gain/no loss’ provided that the couple is married or in a civil partnership and living together during the tax year.
This no gain/no loss rule applies only to transfers/disposal between spouses. It will not apply to children and other family members, which means if you transfer the property to any child, brother, sister or other close relatives, there will be capital gains tax payable. The transfer is deemed to take place at the property’s market value.
Proceeds of sale of property XX
Less: purchase price of the property (XX)
Less: costs related to the disposal of the property (XX)
Less: costs related to the acquisition of the property (XX)
Less: capital expenditures incurred on the property (XX)
Gain on the disposal of the property XX
Less: Tax reliefs available (if any) (XX)
Principal Private Residence (PPR) Relief (XX)
Letting Relief (XX)
Taxable gain XX
Basic rate £0 to £50,270
Higher rate £50,271 to £150,000
Additional rate over £150,000
|Taxpayer Income band||Gain on the sale of Residential Property||Gain on the sale of Other assets|
The normal due date for capital gains tax payment is 31 January, following the end of the tax year in which the gain arose. However, there are a few exceptions, mainly for the gains made on the disposal of residential properties:
If you have recently sold your residential or business property and would like us to help you in relation to this, please get in touch.
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