Tax Implications of Selling a House in the UK

Selling a property in the UK can come with tax obligations, depending on factors such as whether it’s your main residence or a second home. Understanding the tax implications can help you plan ahead and avoid unexpected costs. At Lyons Bowe Solicitors, we assist homeowners with the legal aspects of selling property, including tax considerations.

In this guide, we’ll explain the key taxes you may need to pay when selling a house in the UK.

1. Capital Gains Tax (CGT) on Property Sales

Do You Need to Pay Capital Gains Tax?

Capital Gains Tax (CGT) applies when you sell a property that is not your main residence and you make a profit. This usually includes:

• Buy-to-let properties
• Second homes
• Inherited properties (if sold at a profit)

If you’re selling your main home, Private Residence Relief (PRR) usually exempts you from CGT.

How is CGT Calculated?

CGT is charged on the profit (the difference between the purchase price and selling price) after deducting allowable expenses, such as:

• Estate agent fees
• Solicitor fees
• Stamp Duty Land Tax paid at the time of purchase
• Renovation costs (if they add value to the property, such as extensions)

Capital Gains Tax Rates for Property

• 18% for basic-rate taxpayers
• 24% for higher and additional rate taxpayers (increased from 28% in April 2024)

Example CGT Calculation

• You bought a second home for £200,000 and sell it for £300,000.
• Your profit is £100,000.
• Deduct £6,000 in selling expenses (legal fees, estate agent fees, etc.).
• Your taxable gain is £94,000.
• If you’re a higher-rate taxpayer, you pay 24% CGT (£22,560).

How to Pay CGT

• You must report and pay CGT to HMRC within 60 days of the property sale.
• This is done via the Capital Gains Tax on UK Property service on the HMRC website.

2. Stamp Duty Land Tax (SDLT) on Selling Property

As a seller, you don’t pay Stamp Duty Land Tax (SDLT)—this is paid by the buyer. However, if you plan to buy another property, be aware of Stamp Duty rates, especially if purchasing a second home.

3. Income Tax on Property Sales

If you regularly buy and sell properties as part of a business, HMRC may classify your income as trading income instead of capital gains. In this case, profits may be subject to Income Tax instead of CGT.

4. Inheritance Tax (IHT) on Property Sales

If you inherit a property and sell it, you won’t pay Inheritance Tax (IHT) yourself, but the estate of the deceased may owe tax if their total assets exceed £325,000. If you later sell the inherited property at a profit, Capital Gains Tax (CGT) may apply.

5. Private Residence Relief (PRR) and Letting Relief

If the property you are selling is your main home, you are usually exempt from Capital Gains Tax under Private Residence Relief (PRR).

What If You Rented Out Your Home?

If you previously rented out part of your main home, you may be eligible for Letting Relief, which can reduce your CGT liability. However, since 2020, this relief only applies if you lived in the property at the same time as your tenant.

How Lyons Bowe Can Help with Property Sales

Selling a home involves more than just finding a buyer. At Lyons Bowe Solicitors, our property law experts help sellers navigate the legal process, ensuring compliance with tax regulations and a smooth transaction.

Get Expert Advice on Selling Your Property

If you’re unsure about your tax obligations when selling a home, our team can provide tailored legal guidance.

Contact Us Today

Let us handle the legal side of your property sale, so you can focus on your next move!