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What are the recent changes to capital gains tax and what impact does this have for property owners?

Real Estate Agent with RealMax Realty

There are a number of taxes that UK property owners are subject to, one of which is Capital Gains Tax (CGT). 

CGT is a tax applied to profits from the sale of assets, typically including second homes, buy-to-let properties, business premises, and inherited properties, although it is the gain you make that is taxed, not the total amount of money you receive for the asset. Thankfully, you usually don't have to pay CGT on your home if it has been your only or main residence. However, there are circumstances where you might have to pay if you've used part of the property for business, let it out, or if the total area is over 5,000 square meters.

The CGT rates for residential properties exceed those for other types of assets, although everyone has a CGT allowance, meaning gains below a certain threshold are tax-free. Unfortunately, this threshold has decreased significantly in recent years. Prior to April 2023 it was £12,300, from 6 April 2023 – 5 April 2024 it was £6,000 and as of 6 April 2024 the current individual tax-free allowance is £3,000 (for Trusts it is £1,500). For cohabiting couples, gains are calculated based on their combined assets, which would currently be £6,000. It's crucial to utilise your annual allowance within the year, as it cannot be carried over to future years. 

Rates for Capital Gains Tax in the 2023-24 tax year

There are two rates of CGT in the UK - one for property and one for other assets:

Standard Capital Gains Tax Rates:

For non-property assets:

  • 10% for basic rate taxpayers
  • 20% for higher and additional rate taxpayers

For property (that is not your main home):

  • 18% for basic rate taxpayers
  • 28% for higher and additional rate taxpayers

These rates are determined by your tax status for the year, which could place you in an unexpectedly higher tax bracket. 

Deductions and Exemptions

Depending on your individual circumstances, there are several tax relief options that can reduce the amount of CGT you pay or mean you are exempt entirely, such as Private Residence Relief for your home or Entrepreneurs' Relief for business assets. 

Gifts to your spouse or a charity do not incur CGT, just as property used by a dependent may qualify for private residence relief. If you're dealing with a gifted or inherited property or one sold below market value, CGT is based on the property's market value at the time of the gift, inheritance, or sale.

You can also claim deductions on the amount of capital gains tax you pay based on fees you have already paid for the property. This includes any fees you needed to pay to inherit the property (e.g. solicitor or surveyor fees), and any work that you have done to the property before you sell it that has significantly improved its value (general maintenance fees are not included), and the costs of selling the property (such as estate agent fees, surveyor fees and solicitor fees). Always keep receipts and records of these payments and make sure you get a professional valuation of the property before and after any significant work is undertaken. 

What recent changes have been made to Capital Gains Tax? 

In the recent Spring Budget on 6 March 2024, Chancellor Jeremy Hunt announced several changes to property taxes. 

This included removing tax breaks for furnished holiday lettings as of April 2025 with the intention of increasing the number of longer-term rental properties available – particularly in popular tourist hotspots – and abolishing stamp duty tax relief for multiple dwelling purchases as of 1 June 2024. This tax relief was originally introduced to increase the number of private rental properties available and relieve the pressure on the rental sector, but the uptake has been much lower than expected. 

When it comes to CGT, the Chancellor announced a cut to the 28% rate for higher and additional rate taxpayers. The lower rate of CGT (18%) for basic rate taxpayers will remain the same, but as of 6 April 2024, the higher rate of CGT for residential property sales has dropped by 4% to 24%. 

Please note that tax rates and allowances are subject to change following updates in government policy, so it's always a good idea to check the most current rates on the official HM Revenue & Customs (HMRC) website or consult a tax professional for personalized advice.

Michael Elliott
Fathom Realty - Burlington Township, NJ
Burlington, New Jersey Residential Sales

Luckily, I spent zero pounds on this home, and will sell it for zero pounds upon settlement.

Apr 23, 2024 09:14 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Hugh and great information to share with us here in the Rain.  Hope you are having a great day.

Apr 23, 2024 10:34 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good evening Hugh,

Wow this is excellent information to share to buyers and sellers living in the UK. Always good to keep abreast of recent changes. Well done!

Apr 23, 2024 04:09 PM