Understanding Capital Gains Tax (CGT) is key to avoiding unexpected costs when selling a property. Learn who needs to pay, key exemptions, deductible expenses, and the 60-day reporting deadline. Stay compliant and avoid penalties.

When selling a property, Capital Gains Tax (CGT) can catch many people off guard, leading to unexpected costs. Understanding how CGT works is essential to avoid unnecessary penalties and ensure compliance.

Whether you’re flipping properties or making long-term investments, being informed can save you time and money.

What Is Capital Gains Tax?

CGT applies when you sell a property that is not your main residence and make a profit. Here’s what you need to know:

• 60-Day Reporting Deadline: You must report and pay CGT within 60 days of selling the property via the UK Property Disposal Service.
• Penalties for Late Payment: Missing the deadline results in fines and accruing interest on unpaid tax.

When CGT Does and Doesn’t Apply

No CGT for Your Main Residence

You usually don’t pay CGT if the property was your only home throughout ownership. However, CGT may apply if:

• You own another property that’s considered your main home.
• The land exceeds 0.5 hectares.
• Part of the property was not used as your home.
• You lived in the property only part of the time.
• The property was never lived in but was intended to be your home.
• The property was bought for a family member to live in, rather than yourself.

Business-Owned Properties

If the property is sold through a business trading account, you may not pay CGT but will owe Income Tax on profits.

Inherited & Gifted Properties

• Inherited property: CGT applies only if you sell the property for more than its value at the date of inheritance.
• Gifted property: CGT may be due unless transferred to a spouse or civil partner.

What Can You Deduct from CGT?

To reduce CGT, certain expenses can be deducted from your taxable gain:

Allowable Deductions:

• Estate agent & solicitor fees
• Home improvement costs (e.g., loft conversions, extensions)

Non-Deductible Expenses:

• Routine maintenance costs
• Mortgage interest & repayments
• Personal labour (your own time working on the property)

Who Is Responsible for Paying CGT?

• Direct Owners: If you own and sell the property, CGT is your responsibility.
• Trustees & Nominees: You may not owe CGT, but the beneficial owner must pay it.
• Non-UK Residents: If you sell UK property, you must report the sale – even if no tax is due.

CGT Reporting & Payment

• Annual Exemption: In 2023/24, individuals can earn up to £6,000 tax-free (£3,000 for trusts).
• Real-Time Reporting: HMRC allows early reporting of non-property gains before the tax year ends.
• Alternative Reporting: Self-assessment tax returns can replace the 60-day CGT report if submitted before the deadline.

Penalties & Common Errors

Late Filing Penalties

• Up to 3 months late: £100 penalty
• Over 3 months late: Daily penalties + interest

Common Mistakes to Avoid

• Incorrect property valuations.
• Forgetting to deduct allowable expenses.
• Filing a paper return instead of using HMRC’s online system (where possible)

Need Help with CGT?

If you require further guidance on Capital Gains Tax or help with your property transaction, reach out to Whittaker & Co. Our team is here to make CGT compliance clear, efficient, and worry-free.

For more details, visit the HMRC website – Report and pay your Capital Gains Tax: What you need to do – GOV.UK

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