Can I avoid paying capital gains tax?

Can I avoid paying capital gains tax?

If you’re selling a home you’re likely wondering ‘can I avoid paying capital gains’ or ‘how to avoid paying capital gains tax when selling a house’.

Capital gains is defined by as ‘a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value…It’s the gain you make that’s taxed, not the amount of money you receive.’ provides an example ‘you bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).’

What is capital gains tax?

So, capital gains tax is a tax that is paid when significant profit is made on items like second houses, antiques, shares, and more.

You only pay capital gains if you’ve made significant profit within a tax year.

The government sets the figure that can be made per year and you can work out the profit by calculating the difference between what you bought an item for and what you sold it for. The difference is the profit.

How to avoid paying capital gains tax when selling a house

Some people can avoid paying capital gains on their property, but there is a criteria. In order to avoid paying capital gains, you must meet the criteria below:

  • You must have one home that you’ve lived in as your main home for the entire time you’ve owned it
  • You must not let part of it out (lodgers are okay!)
  • You have not used part of it for business only
  • The grounds, including all buildings, are less than 5,000 square metres in total
  • You did not buy it just to make a gain

So, if you meet the criteria above capital gains needn’t be on your mind. If, however you have inherited a property, capital gains may be something you need to think about.

How much is capital gains tax?

As per the formula supplied above, by the capital gains tax is the profit made when you’ve calculated sale price minus price paid.

If you’re looking into capital gains tax in relation to a property you can also subtract any fees from the capital gains tax, so that’s estate agent fees, solicitor fees, maintenance fees or fees in relation to home improvements.  You can then work out the tax rate using the current capital gains tax rate.

According to Money Saving Expert, for 20/21 that’s:

  • An annual exception of £12,300 for individuals
  • The standard CGT rate is 18% on residential property and 10% on other assets
  • For the higher CGT rate it’s 28% on residential property, 20% on other assets.

Cheapest Places to Buy a House in the UK

Are you a property buyer that is on a budget and looking to downsize? Perhaps you are simply trying to get more for your money and need more space..

Check These Tenancies If You’re Thinking of Moving Someone in to Your Home

There are a number of reasons why you want to live with someone. Perhaps you are taking your new relationship to the next stage. In some cases,..

Should I Move My Debts to My Mortgage?

There are many things to think about before you consider moving your debts and increasing your mortgage, as although it may seem like the easy option..

4 Things to Look Out for When Selling to a Cash Property Buyer

Before you start looking into a cash property buyer there are some things you should beware of as not all cash property buyers are legitimate in this..

How to Prepare if Your Mortgage Lender Takes You to Court

If you have missed payments on your mortgage then your lender may be inclined to take you to court in order to repossess your home. This blog will..

How to Sell Your House Privately on Rightmove

Selling your house privately has become a lot easier in recent years given the rise in online estate agents and selling portals it has also become a..
By MikeL | August 28th, 2020 | | Leave a comment

About the Author: MikeL


Related Posts

Get your cash offer NOW!

Recent Posts