If you’re selling a property, certain taxes may apply. But what exactly are these charges, when do you need to pay them – and how are they calculated?

It’s important to be aware of any tax implications involved in the sale of major assets such as property well in advance.

In this article, the team at Property Solvers – experts in buying and selling houses quickly – explain the usual taxes paid when selling a house. Read on to discover the amounts for which you could be liable, as well as any exemptions that may apply.

Property Taxes When Selling a House

So, what taxes do you pay when selling a house? The main duty you may need to consider is Capital Gains Tax (CGT) – and often, this doesn’t even apply.

What is Capital Gains Tax?

UK homeowners must pay Capital Gains Tax upon the sale of certain property.

You may need to pay this tax when you make a profit by selling or otherwise disposing of an asset that has increased in value while in your possession.

Usually, CGT only comes into play when you sell any property that is not your “main residence”. This means you’ll need to own more than one house before the tax applies – and most of the time, you can choose which property is to be considered your main home.

The sale of your main home usually won’t require the payment of CGT (regardless of whether you have a mortgage to clear or not).

When Does CGT Apply?

As mentioned above, you’ll usually need to pay Capital Gains Taxes only when selling a house or property that is not your main residence. However, there are other circumstances in which CGT may be charged. These include the sale of:

  • Land
  • Overseas property (if you reside in the UK)
  • Business premises
  • A property with rooms, land or outbuildings used exclusively for business purposes
  • Inherited property
  • Buy-to-lets
  • Property won in a divorce settlement (outside of the 9 months following a legal separation)

You may also need to pay CGT when selling a main residence with grounds measuring over 5,000 square metres.

When Selling, You Will Only Pay Capital Gains Tax if The Property is Not Your Main Residence

How Much is Capital Gains Tax?

The Capital Gains Tax rate on a property you plan to sell will depend on the financial gains you’ll make as a result.

So what percentage is Capital Gains Tax?

If you’re on basic rate Income Tax, you’ll usually pay 18% of your gains according to current guidance.

You can work this out by calculating the taxable gains you’ll receive from the sale of the property and subtracting any tax-free allowance from this. Then add the amount to the total taxable income your employment or other relevant source.

If your income tax band is anything above the basic rate, you’ll pay 28% CGT on qualifying residential property.

Should the property be a business asset, 10% CGT may apply – unless you fall into a higher tax band. If you pay additional rates of tax, you’ll need to pay 20%.

Note that there are potential deductions available, such as the money spent on certain repairs.

We would recommend speaking to a suitably qualified accountant to see where you stand here. Also, check out our CGT calculator.

Other Taxes When Selling a House

When selling a house, what other taxes do you pay?

You may be required to pay Inheritance Tax (IHT) on a property that has been left to you in someone’s will. However, the deceased’s estate will usually cover this amount. You will likely still be charged CGT if you sell the property while living in a separate “main” residence.

If you plan to buy a new property after the sale, you should also consider budgeting for Stamp Duty Land Tax (SDLT). SDLT is paid by the buyer of a property and applies if that property is worth over £125,000.

You may not be required to pay SDLT if you are a first-time buyer and the property in question is worth under £500,000.

How Can I Reduce My Expenses While Selling a House?

House sales can get costly – particularly when you own more than one property.

If you qualify for CGT, you’ll need to pay it. However, you could make savings in other areas in order to soften the blow.

You could reduce your related expenditure by:

  • Undertaking removals yourself by hiring a van instead of using a specialist company
  • Managing your sale privately instead of via an estate agent
  • Using a fast home buying company such as Property Solvers

When you sell your home with Property Solver’s “Quick House Sale” service, you’ll receive an up front, no obligation quote straight away.

The amount you are offered can be anything up to 75% of your home’s market value. We’ll close the sale in as few as seven days – and you won’t have any estate agency or solicitors’ fees to pay.

For a fast and hassle free sale, feel free to get in touch with the Property Solvers team today. Our friendly experts will be more than happy to provide you with any further advice or information you may need.