There is no “one size fits all” capital gains tax calculation and much will depend on how you owned / lived in the property, the amount of gain, you income tax bracket, the current tax-free allowance amongst other factors.
That’s why we strongly recommend seeking independent tax advice and ask a qualified accountant to cross-check the results from above. There are indeed entirely legal methods to minimise that amount of CGT you will owe.
To go through the individual parts of the above calculator…
Knowing the number of days you have owned the property is crucial to determining the amount of Capital Gains Tax (CGT) owed. You can confirm the date by checking the HM and Registry.
Note that the date for disposal is when contracts are exchanged (also known as entering into an unconditional contract). The disposal date for purchases at traditional auctions, for instance, occurs on the day hammer falls.
The 60 day reporting deadline begins from the date of completion.
If you have not resided in the property for the entire time, you may well be subject to a capital gains tax charge.
By answering “No”, the calculator will ask a series of questions regarding the total amount of time you lived in the property.
You’ll also need to confirm whether you were absent from home because of business / employment within the UK or overseas.
The calculator also accounts for reliefs if the property was tenanted to lodgers. Note that lettings relief for private landlords was abolished in 2020.
After entering these inputs, the calculator will establish the Principle Private Residence (PPR) period. All things being equal, the longer this period is the less tax you will have to pay.
Remember that HMRC may raise a red flag if you have bought the property to simply make a gain (or profit) only to sell shortly after. There is an unspoken rule that the property needs to be owned for over a year to benefit from PPR.
Also, married couples and civil partners can only count one property as their principal (main) residence at any one time.
This is the sold price of the property.
There are some exceptional circumstances where the property’s market value is used to establish the gain. Examples include gifts, under value sales and if the property was owned prior to 1982.
As applied in the calculator above, you can offset the following costs against your CGT liability:
To make sure these figures are accurate, you will need to have the completion statement, invoices / receipts and tax breakdowns from HM Revenue and Customs to hand. Also, make sure you know whether you are a basic or higher rate taxpayer.
These are the remaining funds that the seller receives minus all the selling fees / costs described above. This figure will be stated on the completion statement and will be used to determine the GCT liability.
This is the price that the buyer paid for the property (excluding any associated fees). This can be confirmed (alongside the date), via HM Land Registry.
This is any money spent on a residential property that improves its overall value.
Typically, these relate to costs on refurbishment / renovation and if the property has been extended (into the back garden or the loft, for example).
This is the result of the net proceeds of sale minus the original purchase price minus the enhancement expenditure.
There is also an annual £12,300 Capital Gains Tax allowance.
Note that if the property is owned with a spouse, this allowance effectively doubles.
This is net gain minus the annual exemption.
This is the amount of money after once Capital Gains Tax has been paid.
Your Capital Gains Tax liability will also depend on other income you earn over the tax year. This has not been included in the calculation above
If therefore, you’re a basic rate tax payer, you have made enough capital gain from the sale of a property in addition to your income – you may get pushed into the higher rate tax threshold.
This can be done by following the following steps:
Taking into account the tax-free personal allowance, should this total remain below £37,700 (i.e. the higher rate threshold of £50,270 minus £12,570) – you will remain a basic rate taxpayer.
Note that there are some specific rules if you are earning over £100,000 and other allowances that may come into play. We would highly recommend speaking with a qualified accountant who can provide the best possible advice.