Decoding Capital Gains Tax on Residential Property

Navigating the labyrinth of capital gains tax might seem daunting, but worry not! We've simplified the process of working out your capital gains tax for residential properties.

The process

1. Determine Your Total Taxable Gains

First off, calculate your total taxable gains, essentially the profit you've made from selling your property. Deduct all costs involved in the original purchase of the property, the sales fees, and the expense of any capital improvements (like adding an extension or installing new windows).

2. Apply Any Allowances

Subtract any allowances that apply, such as private residence relief.

3. Factor in the Tax-Free Allowance

Next, take away the tax-free allowance from the total gain. For the current financial year, (Year-end 5th April 2024) this stands at £6K and £3K for the next financial year.

What you're left with is your taxable gain, the amount that will be subject to capital gains tax.

Calculate the Tax

Now let's move onto the tax rates. If you're a higher or additional rate taxpayer, you'll pay:

28% tax on your gains from residential property.

If you’re a basic rate taxpayer, your rates look like this:

18% tax on your gains from residential property, provided your total income (from all sources) doesn't exceed £50K. If your income is above this threshold, a 28% tax applies to the exceeding gain.

Don't earn enough to pay tax?

Even if you don't earn enough to pay tax, there are still some rates to consider:

0% tax on your gains from residential property if your total income (from all sources) is up to £12,570. Above this, you'll pay an 18% tax on the gain up to £50K and 28% tax on any gain exceeding this limit.

Please bear in mind that this information is accurate as of 14th July 2023. However, laws do change, and allowances such as private residence relief might not always be available in the future.

With this easy guide, you're now well-equipped to figure out your capital gains tax on residential properties.

Ready to Calculate Your Gain with Confidence?

Selling a residential property often brings complex tax implications—but you don’t have to navigate them alone. Complete the form below and the team at Chadwick Accountants will guide you through the process, answer your questions, and ensure your reporting is accurate and compliant.