How to reduce the amount of capital gains tax paid on the sale of a property

When selling a property that is not eligible to private residence relief, you may still be able to reduce the amount of capital gains tax due on the profits.

Capital gains tax is usually due on the profits made from the sale of any property that is not your main home.

Generally, you are exempt from capital gains tax if you are selling your main home and have lived in the property for the entire time that you have owned it.

The sale of any other property-type is likely to incur capital gains tax, this includes the sale of:

  • Buy-to-lets.
  • Commercial properties.
  • Inherited properties.
  • Your home if part of the property has been either rented out or used for business purposes only.

If you are due to pay capital gains tax, then the amount that is due will depend on your annual income and the amount of profit you gained from the sale.

The good news is that it may be possible to reduce the amount of capital gains tax that you pay.

Reducing your capital gains tax bill

Here are five popular ways of reducing the amount of CGT due on the sale of a property.

  • Live in the property for a period – Private residence relief can then be claimed for the period that you lived in the property.
  • Use your capital gains tax allowance – Everyone has an annual capital gains tax allowance, for the year 2019/2020 this is worth £12,000.
  • Offset capital losses against gains – You may be able to offset capital losses from previous tax years against your gains this year to reduce your capital gains tax bill.
  • Gift assets to your spouse – Gift all or part of the property to your spouse in order to use their annual capital gains tax allowance and any basic rate band they have remaining.
  • Letting relief – You may be eligible to claim letting relief if you have let out your home and also qualify for private residence relief.

For further help or guidance relating to personal tax planning or capital gains tax, speak to one of our experts here at Michael Bell. Give us a call on 01484 690 730 and we’ll be happy to help.