Capital Gains Tax (CGT) is the tax on profit made when selling a second property (not your main residence). The tax is only on the profit you make, not on the total property value.
Below are 5 ways that you can reduce your Capital Gains Tax bill:
1. Use your annual exemption
Each tax year, every individual is entitled to an annual Capital Gains Tax exemption. In the 2023/24 tax year this is £6,000. Any gain above £6,000 is taxable. This means couples can save £12,000 in tax if they jointly owned the property.
2. Claim Private Residence Relief
If the property you are selling was your main residence at any point during ownership then you might quality for Private Residence Relief (PPR). This might make the property, or part of it exempt from Capital Gains Tax.
The final 18 months of ownership are always eligible for relief even if it was not your primary residence.
3. Transfer property ownership between spouses
Transfers of property between spouses or civil partners are not subject to Capital Gains Tax. This could be a way for you to utilise both of your individual Capital Gains Tax Allowance and reduce the overall tax liability.
4. Offset losses against gains
If you have incurred capital losses from other assets such as shares or business assets then these assets can be used to offset any gains made from selling a property. Depending on the amount of your losses, this could eliminate any Capital Gains Tax liability.
5. Utilise allowable costs
If you have made improvements to the property during your ownership such as an extension then this can be offset against the taxable gain. You can also deduct from the gain any allowable costs such as estate agent fees, stamp duty and legal fees.
Find out how to reduce your tax liability
Tax rules are complex and constantly changing. To make the most of your money and make sure you are utilising all of the tax reliefs and allowances available to you, you can book a no-obligation meeting with a financial adviser online or call us on 0117 973 0500.
The first meeting is typically one hour and can be at your home address, at one of our offices or on zoom. Book online now.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
