Capital Gains Tax (CGT) is tax on the profit that you make when you sell assets that has increased in value since you bought it. The tax only applies to the profit, not the total asset value.
Capital Gains Tax applies on various assets, including when you sell a second home, holiday home or buy-to-let property.
What is the Capital Gains Tax allowance in 2024/25 tax year?
Everyone gets an annual Capital Gains Tax allowance each tax year to offset their overall Capital Gains Tax bill. The government decreased this allowance to just £3,000 per person in the 2024/25 tax year.
Some people choose to sell parts of assets across multiple tax years in order to make better use of their Capital Gains Tax allowance. This is a complex area, a financial adviser at Four Wealth Management can help you to reduce your Capital Gains Tax liability.
Book a no-obligation meeting with a financial adviser
What is Principal Residence Relief (PPR) in the UK?
Principal Private Residence Relief (PPR) is an exemption for Capital Gains Tax on your main property. This means when you sell your primary residence then no capital gains tax would be due provided the property has been your main residence for the entire period that you have owned it and you must have used it as your home.
Do I get Principal Residence Relief if I rented my house out for a few years?
One of the key requirements to qualify for full Principle Residence Relief is that you had to have used the home as your main residence throughout the time that you have owned it. If you rented out part or all of the property or used part of it exclusively for business purposes, then your capital gains tax exemption is likely to be restricted and part of the gain would be liable for tax.
For help calculating your capital gains tax liability, you can book a no-obligation meeting with a financial adviser.
What Capital Gains Tax do I pay if I bought a new home before selling my main home?
The final 9 months of your period of ownership always qualify for Principal Residence Relief, regardless of how you use the property at that time as long as the property had previously been your only or main residence prior to this.
This can be particularly beneficial if you’ve moved out of the property before selling it, as it extends the period of CGT exemption.
When do I need to report a Capital Gain to HMRC?
You need to complete a Self Assessment tax return and report any Capital Gains due in un the capital gains section. It’s important to ensure accurate reporting and timely payment to avoid penalties and interest charges.
Seek financial advice
Capital Gains Tax is a complex area and there are many ways you can reduce your capital gains tax liability through careful financial planning.
At Four Wealth Management, we can help you to calculate your potential liability and work with you to create a financial plan to reduce your overall tax liability over time.
You can book in a no-obligation meeting to find out your options. Meetings are typically one hour and can be at your home address, at one of our offices or on zoom.
Book a no-obligation meeting with a financial adviser or call us on 0117 973 0500.
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.
