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Thinking of selling up but not quite sure where you stand with capital gains tax? Or what that even is? We’ve got you covered! Keep reading to find out when you owe CGT if you sell your house.
When it comes to property, you’ll only owe capital gains tax on the profit you make when you sell or give away a house that isn’t your main home i.e a rental property or second property. This is where the private residence relief comes into play…
You don’t have to pay capital gains tax when you sell (or give away) your home if all of the following apply:
If all these apply, well great news! You’re automatically entitled to the private residence relief, meaning you won’t have to pay capital gains tax.
Ah. So you’ve previously rented your property to a tenant, but then decided you’d rather just live there yourself. And now you’re wondering whether you’ll have to pay capital gains tax.
That’s a bit of a sticky one so listen up!👂
In short, yes, you have to pay capital gains tax. But you can also claim the private residence relief.
You’ve owned a home for 20 years, but only lived in it for 15 of the 20 years. The other 5 years, you rented it to a tenant. You sell this home and make a gain on this sale.
You can claim the private residence relief for the time you lived there which is 15 years. But not for the entire 20 years. You’ll have to work out how much capital gains tax you owe for the 5 years you were renting your property out.
In this case, you’ll still be able to claim the private residence relief, but only for the portion of your home that you lived in (again, you might want to get out the measuring tape to work this one out 🧐).
Even though you don’t have to pay capital gains tax for the portion of your home you lived in, you still have to pay capital gains tax on the remaining portion if a gain is made.
If you sell your property and owe capital gains tax, you can report and pay by using either:
⌛Be warned: you have 60 days from the day you sold your property to report and pay any capital gains tax you owe. ⌛
If you’re selling your home and want to know where you stand with capital gains tax, one of our accredited accountants can help you with that. Find out more here.
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