If you’re thinking of selling a buy-to-let home, you absolutely must know your Capital Gains Tax (CGT) liability. Knowing your CGT obligation is also important if you own multiple rental properties or are considering purchasing one to add to your portfolio.

You should know that your primary residence is exempt from capital gains tax under the current CGT rules.

If I have capital gains or losses, how do I determine my liability?

The CGT calculation is a simple process. The ‘gains’ from the sale of a property are calculated by subtracting the purchase price from the selling price.

It’s important to remember that you can factor in legitimate costs to this calculation as well. E.g. things like stamp duty, legal expenses, and the price of upgrades to the property should be taken into account

In order to minimise your capital gains tax bill, here are some things to keep in mind while investing in a rental property.

Think about the money you can save before taxes. Be sure to take use of your £12,300 tax-free allowance before the end of the year, since it cannot be carried over to the next year.

If you have already used your tax-free allowance, you may want to postpone the sale of a property until the next tax year so that you can use that year’s tax-free amount.

Couples may want to think about forming a joint ownership.

When two people purchase a home together, they may pool their individual tax-free allowances to a maximum of £24,600.

Your combined tax liability may be reduced if your partner has a lower marginal tax rate.

Be sure to factor in all relevant expenses

You may reduce your capital gains tax by deducting some expenses, as we’ve previously noted.

Here are the three most common kinds of expenses to think about:

  • Incidental Costs: including solicitors fees, surveyors’ fees, and estate agent fees
  • Stamp Duty Land Tax (SDLT)
  • Improvement Work Costs: these are classified as work that enhances the asset

Consider the amount of time spent in the property.

CGT liability is affected by the amount of time you actually spend living in the house.

If you own a property and are subject to CGT for four years but have only lived there for two, you may deduct the two years you actually occupied the property from your total CGT liability.

Never before has it been more crucial to constantly monitor your financial situation.

Get in touch with us if you’re having trouble calculating your capital gains tax at