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When do I owe CGT if I sell my house?

  • 3 min read
  • Last updated 28 Dec 2023

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. 

First of all, what’s capital gains tax?

Capital gains tax is the tax you pay when you sell an asset. If you make a profit of over £3,000 in the 2024/25 tax year, you’ll have to pay capital gains tax at the normal rates.

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…

What’s the private residence relief?

You don’t have to pay capital gains tax when you sell (or give away) your home if all of the following apply:

  • You have a home which you’ve consistently lived in (and haven’t let part of it out)
  • You didn’t buy it just to make more money than what you bought it for 🧐
  • Part of your home isn’t used exclusively for business purposes
  • The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total – you might need to get out the measuring tape for this one – a very long one too 😅

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.

What if I used to rent out my main home?

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. 

How it works

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.

What if I only let out part of my home?

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.

How do I pay capital gains tax on property?

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. ⌛

Need tax advice?

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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