Taxes when selling a property
If you sell a property that hasn’t been your main residence during your full period of ownership, such as the sale of a buy-to-let or rental property, you may need to pay capital gains tax or corporation tax on the gains you make.
Capital Gains Tax (CGT)
The gain is generally calculated as the difference between the purchase price and the sales price.
Costs of buying, selling and improving the property would reduce the gain, and there is also an annual capital gains tax-free exemption (£6,000 for the 2023/24 tax year) which can also be deducted, if not used elsewhere.
Capital gains tax would be due on any remaining gain (18% for gains in the basic rate band and 28% for gains in the higher rate tax band) for personally held properties.
Capital Gains Tax rates
| Individual tax payer | Capital Gains Tax rate |
|---|---|
| £0 - £6,000 | 0% |
| Basic rate tax payer | 18% |
| Higher & additional rate tax payer | 28% |
Corporation tax on gains
Whilst it's not technically called capital gains tax, you have to pay tax on the gain when you sell a property from a limited company. When you sell a property through a limited company you pay corporation tax on the gain. You're not entitled to use your capital gains tax-free allowance here. However, for higher rate tax payers, the overall rate of tax can be lower via a limited company.
| Corporation tax |
|---|
| 19% |
Reducing tax on gains
There are many different ways to reduce your tax liability when selling a property. We recommend discussing this with a property accountant who can recommend strategies specific to your situation.
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