When selling your home, you won’t usually be required to pay capital gains tax providing that you meet the criteria for exemption.
Capital gains tax is a tax that is paid on any profits made when selling an item that is worth more than £6,000; this includes the sale of some property.
Whether or not you are required to pay capital gains tax on the sale of a property depends on whether the property is your main home.
Generally, you are not required to pay capital gains tax on the sale of your main home, but you are required to pay it on buy-to-let properties, inherited property, and commercial property.
CGT exemption criteria when selling property
Even if the property that you are selling is your primary home, you will still need to meet the following criteria to be exempt from paying capital gains tax on any profits you gain from the sale.
- You only have one home.
- You have lived in the property for the entire time that you have owned it.
- You have not rented part of it out (this doesn’t include having one lodger).
- You have not used any part of the property for business only.
- The property’s grounds are less than 5,000 square metres in size.
- You didn’t buy the property with the sole purpose of making a gain.
If you meet all the criteria detailed above, then you are eligible for “private residence relief”. The relief will automatically be applied, there is no need to apply to receive it.
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.