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Capital Gains Tax (CGT)

CGT is a tax on the rise in the value of property, payable when you sell up. It is calculated based on the difference between the price you paid when you bought and the price you sell for.

Prior to 2008, CGT was charged at up to 40% depending on your personal tax rate, and taper relief was available, if a property had been owned for more than three years. This no longer applies.

In May 2010, CGT was altered by the new government and now stands at 18% for basic rate taxpayers and 28% for higher rate taxpayers.

In April 2016, George Osborne cut CGT to 10% for lower rate taxpayers and 20% for higher rate payers - but the cuts do not apply to buy-to-let property, which is still charged at 18% and 28% respectively.

Any gains above the annual £11,100 (2016/17) personal threshold will attract CGT. Where a property is owned in joint names, you can make 2 x £11,100= £22,200 in Capital Gains before tax is payable.

CGT is charged on the sale of any property which is not your main home, known as the Principal Private Residence. If you only have one property and it is considered your PPR, then you do not have to pay CGT. But you should be aware that Her Majesty’s Revenue and Customs (HMRC) may want evidence that you were actually living there.

CGT liabilities should be declared annually on your tax return.

Legally minimising or avoiding CGT on buy-to-let properties is very complicated, and ranges from putting properties in trust, to ‘flipping’ tax allowances between properties. Of course, many MPs have been criticised for doing just this and it is only allowed in certain circumstances! Anyone making a substantial sum from selling a property should seek out a good accountant, who can take advantage of all legally available breaks.


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