CAPITAL GAINS TAX CALCULATOR
Capital gains tax is payable on the sale of second homes and buy-to-let property. Use our capital gains tax calculator below to calculate how much CGT you‘ll pay.
|PROFITS AFTER TAX:||CGT:|
|Profits from selling:||7.00|
|Capital Gains Tax (CGT):||6.00|
|Your profits after tax:||20.00|
Please note: This capital gains tax calculator is provided as a guide only on how much Capital Gains Tax you will need to pay in England. It assumes that the chargeable gain came from property and you are not claiming any Capital Gains Tax losses from previous tax years.
CAPITAL GAINS TAX – AN OVERVIEW
Capital gains tax can be extremely complex even with a capital gains tax calculator… but it can also be extremely simple. Here is what you need to know about CGT.
Do I Pay Capital Gains Tax On Property?
If you sell a property in the UK, you may need to pay capital gains tax (CGT) on the profits you make. You generally won‘t need to pay the tax when selling your main home. However, you will usually face a CGT bill when selling a buy-to-let property or second home. You may also need to pay CGT if your home is partly used as a business premises, or you lease out part of your property.
Capital Gains Tax Rates On Property
In the UK, you pay higher rates of CGT on property than other assets.
Basic-rate taxpayers pay 18% on gains they make when selling property, while higher and additional-rate taxpayers pay 28%.
With other assets, the basic-rate of CGT is 10%, and the higher-rate is 20%.
Bear in mind that any capital gains will be included when working out your tax status for the year, and may push you into a higher bracket.
All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free. In 2020-21, you can make tax-free capital gains of up to £12,300. Couples who jointly own assets can combine this allowance, potentially allowing a gain of £24,600. You can find out more in our guide to
capital gains tax rates and allowances. You‘re not allowed to carry this forward, so if you don‘t use it, you‘ll lose it.
How Much Capital Gains Tax Will I Pay?
As the name suggests, Capital Gains Tax is only charged on the gains you make, rather than the amount you sell the property for.
To work out your gain, deduct the amount you originally bought the property for from the sales price. Then deduct any legitimate costs involved with buying and selling, such as broker fees, stamp duty, and improvements to the property while you owned it.
You can also offset losses when selling other assets, and these can be carried forward indefinitely. As such, if you have a property portfolio, and make, say, a £50,000 loss when selling one property, that will increase the tax-free gain you can make when selling another. You claim your losses via your self-assessment tax return, or by calling HMRC. You can claim losses up to four years after they were incurred.
For any taxable gains above the tax-free allowance of £12,300 in 2020-21, you‘ll pay the Capital Gains Tax property rates.
When Is Capital Gains Tax Due?
For any property sold during the 2019-20 year, you had until the self-assessment tax deadline on 31 January 2021 to report the disposal and pay the tax owed. Anyone who makes a taxable capital gain from UK residential property in the 2020-21 tax year will have to pay the tax owed within 30 days of the completion of the sale or disposal. You‘ll do this by submitting a ‘residential property return‘ and making a payment on account.
What Can I Deduct From My Taxable Gain?
You‘re allowed to deduct certain costs involved with buying and selling property from your gain when working out your CGT bill. These include:
- Solicitors and estate agents‘ fees
- Stamp duty when buying the property
Costs involved with improving assets, such as paying for an extension, can also be taken into account when working out your taxable gain. However, you‘re not allowed to deduct costs involved with the upkeep of a property. You‘re also not allowed to deduct mortgage interest either.
Example Of Selling A Second Home
Someone is selling a second home in England for £220,000 after 6 April 2020, after buying it 10 years ago for £120,000. Their taxable income for the year is £25,000.
They‘ve had no work done on the property, but paid £1,000 stamp duty when they bought it, as well as £2,000 for solicitors fees. They will also pay £4,000 in solicitors and estate agent fees when they sell.
Their capital gain is the increase in the property value, or £100,000. After deducting the costs of buying and selling, this comes down to £93,000.
They have no other gains or losses, so can use the full £12,300 CGT allowance against the gain. CGT will be due on the remaining £80,700.
They‘ll pay the 18% basic-rate CGT on £25,000 of this gain. This is because the higher-rate threshold is £50,000, but they‘ve used £25,000 of this on their income for the year.
They‘ll then pay 28% higher-rate on the rest of their gain (£55,700).
- Gain = £100,000 (£220,000, less £120,000 purchase price)
- Gain after costs = £93,000 (£100,000, less £7,000 stamp duty, estate agent and solicitors‘ fees)
- Gain after CGT tax-free allowance = £80,700
- CGT charged at basic = £4,500 (£25,000 at 18%)
- CGT charged at higher rate = £15,596 (£55,700 at 28%)
- Total capital gains bill = £20,096
Capital Gains Tax On Your Main Home
In most cases, you won‘t need to pay Capital Gains Tax when selling the property you live in, because you will be entitled to ‘private residence relief‘.
If the property was sold during the 2019-20 tax year, you won‘t need to pay capital gains tax for the time it was your main residence, plus the past 18 months of ownership (even if you weren‘t living in the property during those 18 months).
For property sales during 2020-21, this 18 months is reduced to nine months.
People with a disability or those who move into a care home can claim for up to the past 36 months of ownership.
However, you may have a capital gains tax bill to pay if you:
- Develop your home, for example, by converting part of it into flats
- Sell part of your garden and your total plot, including the area you‘re selling, is more than half a hectare (1.2 acres)
- Use part of your home exclusively for business
- Let out all or part of your home – this doesn’t include having a single lodger if you need are living in the property too
- Moved out of your property 18 months or more ago – to move into a partner’s home, for example
- Bought a home for the purpose of renovating it and selling it on
How Letting Relief Works In 2020-2021
Letting relief can feel confusing. This example illustrates how to work out capital gains tax when you sell a home you have been letting out.
Linda has owned a property for 20 years (240 months) and has decided to sell up.
- She lived in the property full time for 12 years (144 months)
- She then used it as a second home for four years (48 months)
- She then let it out to a tenant for four years (48 months)
- She has no spouse or civil partner
Here‘s how Linda works out her capital gains tax bill for a sale in 2020-21.
Profit when Linda sells £100,000
Private-residence relief (PRR) 144 months (duration it was Linda’s main residence)
+ 18 months = 162 months
162 months out of 240 months = 67.5%
67.5% of £100,000 = £67,500 of profit covered by PRR
Letting relief 30 months (48 months Linda let it out – 18
months covered by PRR) 30 months out of 240
months = 12.5%
12.5% of £100,000 = £12,500 of profit covered
by letting relief
Amount of profit £100,000 – £67,500 – £12,500 = £20,000
CGT allowance 2020-21 £12,300
Taxable gain £20,000 – £12,300 = £7,700
CGT Liability – if Linda is a basic-rate taxpayer⠀ 18% of £7,700 = £1,386 CGT due
CGT Liability – If Linda is a higher-rate taxpayer⠀ 28% of £7,700 = £2,156 CGT due
Capital Gains Tax On Gifted And Inherited Homes
Your parents or relatives may want you eventually to have their home. If anyone leaves their home to you in their will, you inherit the property at its market value at the time of death.
There is no capital gains tax payable on death, but the value of the home will be included in the estate (defined as all assets and property minus debts and funeral expenses) and inheritance tax may be payable instead.
If you sell the property without having made it your own home, there could be CGT to pay.
This will be based on the increase in value between the date of death and the date when you sell, minus any associated selling costs.
If you’re given the home during the owner’s lifetime, while they are still living there, this is called a gift with reservation.
Essentially this means it still counts for inheritance tax purposes when the gift giver passes away.
You may have to pay CGT when you eventually sell the home, and the amount will be based on the increase in value between the date they gave you the property (not the date of their death) and the date you sell.
This is the case even though there may also be inheritance tax to pay on the home at the time of death.
Example Of CGT On Inherited Homes
These tables explain what would happen if Linda inherited her mother’s home.
The first table explains what would happen if it was gifted on death.
The second table explains what would happen if she was given the home 10 years before her mother‘s death, and she continued to live there until her mother died.
Example 1 Amount
Value at date of death £200,000
Sold for £205,000
Selling costs £3,000
Gain £205,000 – £200,000 – £3,000 = £2,000
CGT allowance 2020-21⠀⠀⠀⠀⠀⠀ £12,300, therefore no CGT is due
Example 2 Amount
Value at date of death £140,000
Sold on for £205,000
Selling costs £3,000
Gain £205,000 – £140,000 – £3,000 = £62,000
CGT allowance 2020-21 £12,300
Taxable gain £62,000 – £12,300 = £49,700
CGT Liability – if Linda is a basic-rate taxpayer 18% on gain that takes you to higher-rate threshold
28% on amount above this
CGT Liability – If Linda is a higher-rate taxpayer 28% of £49,700 = £13,916 CGT due
Which Other Taxes May Be Due On UK Property?
Capital Gains Tax is just one of the taxes that is levied on properties in the UK, charged when you come to sell it.
When you buy a home, you will likely need to pay stamp duty on the purchase price. The amount depends on whether it‘s your main home or a second home or buy to let investment. Calculate the Stamp Duty on your residential property purchase in England or Northern Ireland using our handy calculator here.
Note. The information above is correct at the time of writing. It is always advisable to visit the HMRC website for the latest information relating to Capital Gains Tax.