CGT or Capital Gains Tax

CGT is a tax on the profit (the gain) an individual makes when they sell an asset that has increased in value. Note that it is a tax that individuals pay, and not limited companies.

This tax is payable on the gain made on the sale of a property after deducting purchase and selling costs such as stamp duty, legal fees, the estate agency fees and some capital improvements. It is also payable if a landlord transfers a property to a limited company, using the deemed market value.

CGT is only payable if the total gains in a tax year are above the annual tax free allowance. In the 2022-23 tax year it is £12,300, reducing to £6,000 in 2023-24 and £3,000 from the 2023-25 tax year. The rules are more complex if the property was the seller’s principal residence before being let, eg accidental landlords.

Private landlords pay 28% of the gains from residential property over the tax free allowance. They must report gains over the tax free allowance to HMRC within 60 days of completion.

Useful resources

HMRC guide to CGT.

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