Capital Gains Tax on property: the basics

You usually don't have to pay Capital Gains Tax when you sell or dispose of your own home. But you may have to pay Capital Gains Tax when you sell or dispose of a piece of land or a property that's not your main home.

On this page:

What is Capital Gains Tax?

Capital Gains Tax is a tax on the gain you make when you sell or otherwise 'dispose of' an asset.

You usually dispose of an asset when you no longer own it. For example if you:

  • sell it
  • give it away
  • transfer it to someone else
  • exchange it for something else

So if you make a gift of a property to your children, you have to work out if there's any Capital Gains Tax to pay on the disposal of the property at that time.

In some cases you're treated as if you've disposed of an asset. For example your building has been destroyed and you've received a capital sum, such as an insurance payout, as compensation.

The gain you make, not the amount of money you receive for the asset, may be liable to Capital Gains Tax.

Top

Property you might pay Capital Gains Tax on

When you sell or dispose of property - such as a building, land or a lease - you have to work out if you have any Capital Gains Tax to pay.

However, if you sell your main home you're usually entitled to Private Residence Relief on any gain you make which means there's no tax to pay. See the section 'Selling your own home' below.

Typical types of property you might pay Capital Gains Tax on include:

  • a property that you've bought as an investment, for example a buy-to-let property
  • a second home, for example a holiday home in the UK or overseas
  • business premises, such as a shop or a factory
  • land, such as agricultural land

There are special rules for working out certain gains and losses on land - see the section on 'Land and leases' below.

If your property counts as a business asset there are other reliefs which may be available. See our guide about Capital Gains Tax reliefs on property that's not your main home.

Capital Gains Tax reliefs on property that's not your main home

Top

Working out Capital Gains Tax

In straightforward cases you need to:

  • look separately at each asset disposed of that's liable to Capital Gains Tax and work out each gain or loss
  • add together the gains and take away any losses
  • deduct your tax-free allowance (known as the Annual Exempt Amount)
  • work out the tax due on the gains that remain

Read the step-by-step guide below to find out more

Capital Gains Tax rates and annual tax-free allowances

Step-by-step guide to working out Capital Gains Tax

Top

Reporting a gain or loss

You pay any Capital Gains Tax through the Self Assessment system and it is calculated as part of your Self Assessment tax return.

If you haven't received a letter telling you to complete a tax return, but think you need to complete one, you should tell HM Revenue & Customs (HMRC). You may have to pay a penalty if you don't.

You should keep any records and information that might help you work out your capital gain or loss. If you've made a loss on a disposal you'll need to claim it in order to set it off against your gains.

More on reporting gains and time limits

More on what to do if you've made a loss

Top

Selling your own home

Normally you don't have to pay Capital Gains Tax when you sell or dispose of your own home, as you may be entitled to Private Residence Relief. Private Residence Relief may exempt all or part of any gain you may have made.

You must have used the property as your only or main residence during the time you've owned it. There are also other factors that you need to consider to work out what Private Residence Relief you may be due.

Find out more about tax relief on your own home

Top

Selling or giving property to family

Property that's not your own home

If you sell, give or dispose of a property to your husband, wife or civil partner you don't normally pay Capital Gains Tax. You must have lived together for at least part of the tax year in which you made the disposal.

However, if your husband, wife or civil partner later sells or disposes of the property, they'll have to work out the tax due. It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset.

You have to work out if you made a gain or loss and any Capital Gains Tax due if you dispose of a property to:

  • any other family member
  • your husband, wife or civil partner if you haven't lived with them during that tax year

Your own home

If you give away your home, you don't have to pay Capital Gains Tax as long as you're entitled to full Private Residence Relief. See the first link below for more information. For example, you might give your home to your child. But your child may have to pay Capital Gains Tax when they sell or dispose of it.

Find out more about tax relief on your own home

More about how to calculate capital gains on property

Top

Property trading

If you buy and sell property as your business you pay Income Tax rather than Capital Gains Tax on any profits you make from the property. This applies whether you are a sole trader or in a partnership. This may include a one-off purchase and sale of a property. You usually pay any Income Tax due by completing a Self Assessment tax return.

If you are a director or shareholder in a company which carries out property trading, any profits on properties disposed of are part of the company's profits. The company will pay Corporation Tax on its profits.

Tax returns if you're self-employed or in a partnership

More about Corporation Tax

Top

Land and leases

In many cases you work out the gain or loss when you dispose of land in the same way as for other assets. But there are special rules for working out gains and losses if you:

  • dispose of land that's been compulsorily purchased
  • grant a lease
  • assign or surrender a lease

You can find out more about these rules and see some examples in the helpsheet below.

Download the latest helpsheet on land, leases and Capital Gains Tax - Helpsheet 292 (PDF 89K)

Top

Overseas property

If you choose to live or work in the UK and do so on a regular basis, you're probably resident here. You are liable to Capital Gains Tax on gains arising both in and outside the UK.

Typical overseas property includes:

  • a holiday home abroad
  • land overseas bought for development
  • a property that you let overseas

However, if you're 'resident' in the UK but not 'domiciled' here, you may be able to claim what's known as the 'remittance basis'.

Residency, domicile and tax on foreign gains are complicated subjects - a lot depends on the facts of each case. See more in the guidance below or contact HMRC.

RDR1 - Residence, domicile and the remittance basis

Top

High value residential property

From 6 April 2013 companies may have to pay Capital Gains Tax if they dispose of high value residential property that was subject to the Annual Tax on Enveloped Dwellings (ATED).

Find out more about the extension to Capital Gains Tax

More useful links

Capital Gains Tax record keeping

Top