What is capital gains tax and when do I pay it on my home?
Capital gains tax (CGT) is payable when you sell an asset that has increased in value since you bought it. The rate varies based on several factors, such as your income and size of gain. For residential property, it maybe 18% or 28% of the gain (not the total sale price).
Usually, when you sell your main home (or only home) you don’t have to pay any CGT. However, in some circumstances, you may have to pay some.
The home includes a lot of land/additional buildings (5000 square meters or more)
You’ve sub-let part of it (but having one lodger doesn’t count)
Part of your home is exclusively business premises
Capital Gains Tax comes into play when you make a profit from selling something you own. The important point to remember is that the tax is calculated on the profit you make, and not the amount you sold it for. As the name suggests, it’s all about the gain!
So, Capital Gains Tax is essentially a tax on any profit you made on the disposal of an asset and it applies to most assets when they’re sold. There are some exceptions, however – for example, your car, your main place of residence if you own your home, and personal possessions sold for £6,000 or under are all exempt.
You don’t pay Capital Gains Tax when you sell your car unless you use it for business. There are also some complex rules for assets with an expected life...