When it comes to property, Capital Gains Tax can be a significant cost, but fortunately there are many exemptions that can help mitigate the impact of the tax. Capital Gains Tax is levied on the increase in value of a capital asset when it is disposed of – even if just given away as a gift, you may be liable to pay tax on the increased worth of the property.
For all liable assets including property, Capital Gains Tax is calculated in the following manner:
- The first £9,200 of capital gains is tax-free.
- Capital gains in excess of this amount are added to your taxable income and taxed appropriately, as the top slice of the new sum of income – thus at rates of 10%, 20% or 40%.
- Taper relief reduces the tax rates applicable to a particular asset’s capital gains depending on the period of time that you have owned the asset for.
Property is also subject to a number of special rules and exemptions:
- Your primary private residence is exempt from Capital Gains Tax, as long as it follows certain guidelines on matters such as outhouses and the area of any gardens or grounds.
- A property that was your primary private residence remains exempt from Capital Gains Tax for up to three years after it ceases to be your main home.
- A property that had part of its premises used exclusively for business purposes will be eligible for Capital Gains Tax, even if your primary private residence.
- Married couples and civil partners may only have a single property nominated for this private residence relief.
Take a look at our online Fair Investment Tax Bookshop for more information, advice and guides to property and Capital Gains Tax, including:
Property Capital Gains Tax Calculator