10 Things You Need to Know to Avoid Capital Gains Tax on Property

Picture of Written by: Liez Comendador
Written by: Liez Comendador
Avoid Capital Gains Tax

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As the name Capital Gains Tax suggests, it is a tax on Capital Gains (depending on the investment, you will be taxed while buying or selling property). Capital is wealth in the form of money or property used to make more wealth, and gain increases the value of that wealth. CGT was first introduced in the UK in 1965, and a CGT liability may arise when a chargeable person makes chargeable disposal of a chargeable asset. In short, you become chargeable to CGT either you are an individual who is a tax resident in the UK, or you are the personal representative of a deceased person1. UK government is thinking on getting as much money into their coffers as quickly as possible due to the massive spending in the wake of the Pandemic2. You are probably wondering; how can I avoid Capital Gains Tax on the property3?

You become chargeable to CGT either you are an individual who is a tax resident in the UK, or you are the personal representative of a deceased person.”

This article lay out 10 Strategies you can follow to avoid Capital Gains Tax on your property. You can send us a message or book an appointment with us to assist you on this matter.

If you are looking for ways to avoid your CGT, follow the given tips:

1. Use CGT allowance

Every individual has an annual CGT allowance of up to £12,300, allowing you to make an investment of the allowance amount (£12,300) free of any tax. If not used, the allowance cannot be carried forward into the next tax year, so it is prudent to use this tax-free allowance each year to minimize the risk of sustaining a significant CGT bill in the following years. 

CGT allowance

2. Offset losses against gains 

Disposing assets at a loss can be a robust and calculated move when cutting your CGT bill. Unlike the Capital Gains Tax allowance, you can cart losses onward to balance against gains made in future years. Suppose you are preparing to sell an asset attracting a significant CGT bill.

Offset losses against gains

In that case, you may also want to consider setting other assets that are not as valuable as they were once, such as meagre-performing investment stocks and shares. The loss made on this removal can then be used to offset against the CGT bill ascending from the more lucrative disposal.

3. Gift assets to your spouse

Capital Gains Tax is exempted on the transfers between spouses, which means that property can be transferred between the spouses or civil partners to use both annual CGT allowances which is £24,600. It effectively doubles the CGT allowance for married couples and civil partners. The transfer must be an unpretentious, absolute gift. 

4. Reduce taxable income 

The rate of CGT is charged grounded on the rate of paid Income Tax. Consequently, lowering taxable profits in any one year could reduce the CGT rate from 10% to 20% or 18% to 28% if you sell residential property. Reducing taxable income can be done in several ways: waiting for retirement and an alteration from remunerations to pension income; salary sacrifice through pension contributions or childcare checks; complying with the State Pension or reassigning taxable income bearing possessions such as cash deposits to a spouse earning lower than the other one.

Reduce taxable income

5. Buying and selling within the family

Can also be referred as bed your spouse, which might sound odd, but the notion is simple. Initially, it curtails ‘bed and breakfasting’, which means to sell property only to repurchase it on the same day. The purpose for doing this is that when the property goes up in value, you dispose it off and utilize your CGT exception to cover any gain. You repurchase it because it is likely to increase in value.  

By bed your spouse rule, the valuable possessions can be kept within the family while still minimizing any CGT.”

When you sell it in the future, the gain will be calculated between the repurchased values instead of the original value when it was first purchased. This practice has been obliterated by a thirty-day rule that directs, thirty days should pass before you can repurchase similar shares. Nevertheless, a genuine ambiguity around this is selling the property and getting your husband or wife or a civil partner to buy the same property.

In this way, the valuable possessions can be kept within the family while still minimizing any CGT when it comes to future disposal.

6. Contribute to a pension 

The most effective way of reducing Capital Gains Tax for higher taxpayers is by paying into a pension fund. It is because, when you pay into a pension fund, you receive tax relief from the government by way of spreading your basic rate income tax band. If you put £3,000 into your pension and your annual salary is £65,000, you only need to pay 40% income tax on £6,000 of your earnings instead of £7,000 (excluding your personal allowance, you have to pay 20% income tax).

Contribute to a pension

The further you prolong your basic rate income tax band, the possibility for CGT to fall into the lower rates will increase. If you are not sure how this works, see our article on capital gains tax which explains how much CGT you pay.

7. Make charity donations

Donating to Charities increases your basic rate income tax band and allows more CGT to drop into the lower rates.”

Contributing to charities helps lessen your CGT in a similar way to paying into a pension fund. However, there are caps when it comes to giving in to a pension endowment, either the equal of your annual salary or £40,000 (whichever is lower). If you have exploited this opportunity already, you may want to consider donating assets or cash to a charity. It again increases your basic rate income tax band and allows more CGT to drop into the lower rates. 

8. Spread gains over Tax years 

A strategy to reduce tax by the people with highly volatile incomes typically uses to decrease the total marginal tax rate paid on a large amount of income4. This strategy involves mostly large cradles of income, dividing the amount realized over the years to reduce the overall taxes paid. This method can be used to avoid getting bumped up into a higher CGT bracket, which would also, in turn, result in a greater tax liability.

9. Availing ISA allowance

Around 19 million in the UK use Individual Savings Account (ISA) a tax shelter to retain income and capital gains from the taxman’s grasp. Gains made inside an ISA are free from CGT, so an ISA is one of the best defenses against paying unnecessary tax. Safe from HM Revenue and Customs (HMRC) hands, many investors have made six figures sum inside ISA for many years. Like the bed and spouse alternative, ISA involves selling assets to realize a capital gain and then instantly purchase back the same possessions inside an ISA. It allows all future gains on the possessions to be free of Capital Gains Tax. 

Availing ISA allowance

10. Invest in small companies

Willing to take a risk? By investing in special tax-efficient programs which provide funding to small businesses, you can reclaim some, if not all, of the Income Tax and CGT you have already paid. These schemes are known as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) and are usually full of risks, so they are best left to professional investors. It is imperative to talk to an experienced advisor before even considering these schemes. If you want to delve into this strategy, Legend Financial has a team of experts that can guide you along the way.

CGT is the difference between the amount you paid for the property and for the amount you sell it. The difference being produced is the gain.

Usually, a charge to Capital Gains Tax arises after selling a property, but it can also occur in the following cases:

  • Give away a chargeable asset.
  • Transfer a chargeable asset to another person.
  • Exchange a chargeable asset for something else.
  • Receive reimbursement for the loss or destruction of an asset-for example, an insurance payout.

Tips to avoid CGT on a Property Sale 

Regardless of what personal assets you plan to sell, there are some strategies you can use to minimize the capital gains tax for which you are liable. The UK outlines a few circumstances that make evading capital gains tax on a property sale possible. It is mainly the case when a local sell his/her home5.

The person residing must meet all criteria to avoid the capital gains tax on a property sale. Firstly, the house that the resident is selling should be the primary residence6. It needs to be the only property that the owner has. Property holders must prove that they did not buy the property only to make a gain.

For those who have breathed in the unit for years to declare it as their primary residence, this should not be a problem. However, this factor could become knotty for those who flip homes. If you buy a home as a fixer-upper or an asset, you will likely have to pay CGT upon sale.

Have you heard of Private Residence Relief?  

NO Capital Gains Tax has to be paid when you sell (dispose of) your home if all of the following apply7:

  • Have one house and have been living in it as your main home for all the time you have owned it
  • You have not let a portion of it out. This does not exclude having a tenant
  • Part of your home has not been used solely for commercial purposes (using a room as a temporary office does not count as commercial use)
  • The whole building is less than 5,000 square feet
  • It was not bought just for earning gain.

Tips to avoid CGT on Inherited Property 

Parents and Grandparents gifting property to their children have become common. If inherited property is the primary residence, then Capital Gains Tax will be exempted. If you do not want to sell your property to avoid capital gains tax after you die, IHT will be implied (40% of your gained profit). HMRC allows the sale of inherited property without paying Capital Gains Tax but with some rules and regulations.

If you stand to inherit property and you want to avoid paying taxes on it, there are possible options for minimizing capital gains tax altogether.

Tips to Avoid CGT on Inherited Property

By selling the inherited property right away, you’re not leaving any room for the property to appreciate any further.”

The first is to sell the property as soon as you have inherited it. By selling it right away, you are not leaving any room for the property to appreciate any further. So, if you inherit your parents’ home worth £200,000, selling it right away could help you avoid capital gains tax if it still worth’s £200,000 at the time of the sale.

Another possible option is not to sell the property and rent it out instead of living in it. However, this can be a little tricky since there are still tax rules you have to observe. An inherited home treated as an investment property for tax purposes would still be subject to capital gains tax if you decide to sell it.

Tips to avoid CGT on Overseas Property

The most common question asked is, What should be done to avoid Capital Gains Tax on the property? This question comes with a straightforward answer given below.

The occupant must affirm to the government that the foreign home will serve only as the primary residence. Normally, property holders should make this declaration within two years of buying foreign goods. The only way this would be problematic was if the UK resident definite of selling his foreign and UK property in the same year. And, if you want to evade CGT on your foreign assets, you must keep this in mind.

  • UK government does not need CGT if the property is available to everyone as their primary residence.
  • If UK residents declare a global home as their primary residence, it is possible to avoid taxes on foreign goods.

So, residents should declare to the UK government that a foreign home can function as a primary residence. Usually, owners should claim their foreign property as primary residence within two years of purchasing the foreign property. CGT will only be charged if you try to sell your foreign property within one year.

Capital Gains Tax is not a concern that only shakes the wealthy. Average taxpayers can save thousands of pounds on CGT by using a few of the mentioned tactics. If you are concerned regarding How to avoid Capital Gains Tax on the property, just remember that you need not to pay CGT on the primary residence because the UK government allows you to do so.

Works Cited 

Author

  • Junaid Usman

    Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

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Picture of Junaid Usman
Junaid Usman
Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

47 thoughts on “10 Things You Need to Know to Avoid Capital Gains Tax on Property”

  1. Hi
    I am not clear about capital gain tax, we bought a house in 2003, lived there for 14 year and then moved to another house due to work, 2 year ago we bought another house but were not able to sell the old house so rented it out

    We are planning to sell that house it has an outstanding mortgage of £275,000 and deposit commitment of £100,000.
    Do we pay capital gain tax after deduction above as well as estate agent fees, solicitors fees and any update we did since we bought it ?
    Thanks
    Imran

    1. Thank you for your comments. In respect of capital gains tax calculation, you will be able to claim private residence relief for the period of ownership which will significantly reduce the capital gains and with the other expenses and the annual exemption that could be brought down further.

      I would suggest, to contact us on hello@legendfinancial.co.uk, with your availability to speak with one of our tax advisors and get further assistance with this.

      Many thanks,

  2. Rimma Patvakanian

    Hi,
    My ex husband purchased a house in 2002 for £240,000.
    We married in 2004 and I moved out of marital home in November 2017. My ex husband still lives there. The Decree Absolute granted in January 2019. I wanted to transfer the FMH to my sole name. The property values at £554,000.
    How much I had to pay capital gain tax? Can I use PPR?
    Regards Rimma.

    1. Hello Rimma,
      Thank you for your comments here.

      Based on this brief note, we would like to know further about the legal ownership in the property from 2004 onwards, without this It is uncertain whether PPR could be claimed. Also, there are separation conditions that could after the capital gains tax.

      This appears to be slightly complex, but we can discuss this further and help you get the optimal outcome on this matter. Please drop us an email on hello@legendfinancial.co.uk with your contact details and suitable time, we can arrange a short call with one of our tax advisors to understand the nature of the case and advice further.

  3. Hi,
    Nice article however I have a query on CGT liability in the following circumstance
    – Parents gifted/signed over their property to 2 sons in April 2014 with an ongoing reservation of benefits clause until their death.

    – December 2022, both parents have passed and the 2 sons are now in full control of the property.

    – The property value has appreciated by £60k since 2014.

    Is the CGT liability taken as the gain since April 2014
    or
    Does the ongoing reservation of benefits clause only invoke chargeable gain from the date of parents death to the date of sale. In other words the change in value between December 2022 and the eventual sale date ?

    Many Thanks

    1. Hi Ricky, Thank you for your comment on our article.

      Your query is of a complex nature due to Gift with Reservation and may have implications in relation to Inheritance Tax. We would prefer if you can drop us an email on hello@legendfinancial.co.uk and one our specialist tax advisor will be able in touch to discuss this through.

      Many thanks,
      Fahad

  4. Hi, we are buying a new house as our main residence. We need to make alterations to it preferably before we move in. Then we intend to sell this house ( our main and only residence for the last 7 years). We will obviously be making some amount of profit on it. Do we have to pay capital gains on the sale of this house as we hope to be able to sell quickly after our move. Thank you.

    1. Hi Del, Thank you for contacting us at Legend Financial.

      As per your comments, the house that you will purchase as your main residence and if sold in sometime after having it as your only main residence, will not attract any capital gains tax.
      If you would like to discuss your matter in detail, and need assistance in declaring the sale of property, kindly drop us an email on hello@legendfinancial.co.uk with your contact details and availability in order for our tax advisor to be in touch with yourself.

      Many thanks,
      Saiqa

  5. Hi! I will be inheriting 20% of my mothers property. If this is sold to developers how are the relevant taxes applied? Is it inheritance tax and capital gains? (My mother has my deceased fathers allowance). All beneficiaries are uk tax payers.
    Thanks

    1. Hi Sally,

      Thank you for contacting us.

      There are two aspects of your enquiry, first on the inheritance point – it has to be made more clearer to us, but in general if it’s passed on as inheritance, surely inheritance taxes might have been sorted and if not then there are various rules.

      Secondly, on the sale of the property – yes the capital gains tax implications would apply. This again is something to be covered in detailed, to see how tax efficiently it can be dealt with.

      If you are looking for a detailed advice, I would suggest to drop us an email on hello@legendfinancial.co.uk with your contact details and suitable times – and one of our advisors will be in touch.

      Many thanks,
      Fahad

  6. Hi
    My wife bought a property for £190,000 in 2015. We have never lived in the property (rented out) & are thinking of selling the approximate value now is £290,000.
    We have spent around £10,000 in improvements.
    My wife current earnings is £40,000 per year.
    How much roughly should we expect to paying CGT?

    Thanks James

    1. Dear James, thank you for your query in respect of your wife’s capital gains tax.

      With the scenario, presented, you could be looking to pay CGT on a capital gain of around £90,000.

      There is an annual exemption available of £12,300 but from 6 April 2023 it will drop down to £6,000, so considering these, you are looking for capital gains tax between £20,000 and £22,500 circa.

      Should you wish to discuss this further, please drop us an email on hello@legendfinancial.co.uk and one of our tax advisors will be in touch with you.

      Many thanks,
      Saiqa

  7. Hello,
    I have recently inherited a property & I don’t want to get stung with capital gains tax, while at the same time my family needs a larger property so to mitigate this could I mortgage the inherited property to purchase a larger family home & rent out the inherited property to pay for the mortgage?
    Kind regards
    Mark

    1. Hi Mark, Based on your comment we feel that you are unaware of the capital gains tax that could be payable in the event of its disposal. It might be an idea to have it discussed with us, so that we can clear your doubts surrounding it. You you can drop an email at hello@legendfinancial.co.uk with your contact details.

      The approach you have suggested, is workable as the property is not sold, so there would not be any capital gains tax implications as such.

      Many thanks,
      Fahad

  8. Hi,
    My husband and I are both UK residents. We bought a small agricultural house in Italy 20 years ago and over the years have enlarged and improved the property and this includes a large pool. We started renting the property commercially about 12 years ago for about 10-15 weeks a year. Before that we used the property for friends and family. We have always used the house ourselves for 3-4 weeks annually and since retirement 3 years ago we have scaled down the renting availability and have used it for ourselves for 2-3 months of the year. We now wish to sell the property and this summer at the end of August we stopped advertising the property to rent. It is currently for sale. We don’t currently own a house in the UK so will any of these factors make a difference in the CGT bill. We anticipate a substantial CGT bill of around after our allowances of something like £30,000 due to the fact that the property prices were very low in that area 20 years ago. We didn’t develop the property for gain as we originally intended to retire to Italy but have since changed our mind.
    Thank you

    1. Dear Andrea,

      We appreciate you for going through our article here, and for your comments.

      Thank you for a brief explanation with respect to your overseas property. There are certain items that can help in the reduction of capital gains tax bill as per your notes, however in terms of obtaining a relief on the property against the gains for prime residence this is arguable.

      Since the property is situated abroad, there will be foreign costs and taxes will be involved, which can also help in reduction of the liability.

      I suggest a quick call with one of our advisors can help further understanding your position better. Should you wish to discuss this further, we would appreciate if you can forward your contact details and availability on hello@legendfinancial.co.uk and one of us will be in touch.

      Many thanks,
      Saiqa

  9. Hi

    I am trying to clarify whether a transfer of property back to its original owner would incur CGT. It was transferred to my sister in law around 10 years ago in order for her to get a loan to pay off our debts. These are all resolved and we would like the name on the deeds to be transferred back to us.

    No capital gain has occurred to either party it was just the only way that money could be obtained to pay off the debt.

    1. Dear Alan,

      Thank you for your comments here.

      It appears that at the time of previous transfer a chargeable event took place. We would need to understand beneficial interest at the time, and also now to establish if a chargeable event would take place.

      I would suggest, if you would like to discuss it further – it would be advisable to be in touch by email on hello@legendfinancial.co.uk with your contact details and your availability.

      Many thanks,
      Darren

  10. Hi Fahad,
    Have sent you an email as well but thought will fill in this form just in case my Yahoo mail has ended up in spam.

    Looking forward to speaking with you.

    regards,
    Ganesh

  11. Hi
    My wife bought her first flat in 1991 for 43k we met and married in 2004. This was her primary residence until 2002.
    It has been let out since then. It is in her name only. About 6k spent over the years maintaining it.
    It is now for sale for 299k. Please could you explain possible CGT implications?
    Regards.

    1. Dear John,

      Thank you for contacting us.

      Based on the figures you have provided, roughly we can estimate capital gains tax to be around £24,000. We can have a detailed discussion and see what other factors are available that can help it reduce further.

      If you wish to discuss further, kindly drop us an email on hello@legendfinancial.co.uk and provide your contact details with a suitable time/date and we can arrange this call.

      Kind regards,
      Saiqa

      1. Hi Fahad
        Can you please gave me a rough estimate on CGT property mortgage on it bought 1998 at 53k but was then remortgage now owing 160k value 300k was first home then move out rental from 2005 to present

        1. Dear Annie,

          Many thanks for contacting us.

          From your question, I note there is a gain of 247k on property owned for around 24 years and after applying private residence relief (assuming no other buying/selling costs are involved) – we are looking at a taxable gain of 165k – part of which will be taxed at 18% only if basic rate band is available and the remainder at 28%.

          If you’d like this to discussed through in detail, please drop us an email on hello@legendfinancial.co.uk and one of our advisers will liaise with you.

          Thank you.
          Fahad

  12. Hello

    I bought my house 13 years ago and lived in it for 3 years. Due to ill health I then moved back to my parents house (rent free as I wasn’t working) and I rented out my house for 9 years. For the last year I have stopped renting it out. As it is the only home I own, will I still have to pay CGT on it?
    Thank you.

    1. Dear Kelly,

      Thank you for contacting us at Legend Financial.

      The Property has been owned for 13 years, and only 3 of those years is where the property can be classed as your prime residence, and the remainder was let out. In this case, the gains on the property relating to three years would be relieved under PRR and the remainder would be taxed. But all of this can be discussed in detail to identify other factors that can lead to a reduction in capital gains tax.

      Should you wish to speak further, please drop us an email on hello@legendfinancial.co.uk and one of our advisors will be in touch with you. It would be appreciated if you can, in the same email, share your contact number and a suitable time/date for it.

      Many thanks
      Saiqa

  13. Hi Fahad,

    Thank you for your very enlightening responses – they are much appreciated. I have a situation something similar to others described above, but also slightly unique.

    Purchased property for £715k in May 2017 in joint ownership with my wife and I
    Stayed in the property as main residence till Nov-18
    Spent close to £70k on renovations (new bathroom, floors, wardrobes, painting, etc) during this period
    I lost my job and moved overseas for a period of ~3 years from Nov-18 onwards
    Property was rented out from May-19 to Apr-22 (3 yrs)
    We have just sold the property as of May-22 for £790k

    Realise there are a number of factors to consider here including cost of acquisition and cost of disposal, the renovations and perhaps most importantly, the fact that the house was leased 3 of the 5 years we owned it.

    I was not a UK tax resident for the 3 years I was overseas, but for the other 2 years I was a UK tax resident.

    Can you please help?

    1. Dear Harry,

      Many thanks for your kind words.

      Yes, we can certainly help. I would like to know if you had managed to report your capital gains to HM Revenue & Customs as of May 2022, as you would be aware there is a reporting deadline of 60 days from date of completion.

      I have gone through your facts and figures and have also worked up on a quick illustration to see the taxable gains.

      I would feel, it would be best we can organise a quick call to see what stages you are at and then arrange a meeting to have it settled appropriately.

      Please drop us your contact details on hello@legendfinancial.co.uk and a suitable time, and one of our tax advisors will be in touch with you soon.

      Kind regards,
      Fahad

  14. I own some land surrounding my farm that is used for business use. We are in the process of gaining planning for houses on the land, we will retain the house and would like some advise on how to minimize my tax burden. We have kept back 1 acre of land to develop ourselves at a later date and I do own another Limited company.

    1. Hi Matthew, thanks for your comments. It is unclear as to what kind of tax burden you are looking to minimise.

      We would recommend for you to speak with one of our advisors, and for this if you can drop us an email with your contact information at hello@legendfinancial.co.uk then we can assist you further.

      Thank you
      Fahad

  15. Hi,

    I am considering selling my shared UK property, that I jointly own with my ex wife, as we both now reside in New Zealand.

    The property in question is currently in a rental agreement and has been since we emigrated to New Zealand, back in September 2004. It was originally purchased in 1993 for 136,000 GBp and consisted of an old 4 bedroomed house and surrounding land, totaling 12.5 acres. It was renovated during the first 5 years of our occupancy.

    During the 18 years of rental, it has accommodated numerous tenants, who have shown little or no respect to the property. This has resulted in a significant fall in the condition of the property. This has prompted us to consider selling the property and cut our losses, as we have now both reached retirement age.

    However, the current rate of Capital Gains Tax have been anything but encouraging

    Regards

    Neal

    1. Dear Neal,

      Many thanks for contacting us at Legend Financial.

      Thank you for the brief scenario of the position at present. Since the property is owned between two individuals – the gains before the taxes are calculated would be split between the two and since both are not resident in the UK – the 18% capital gains tax rate would be applicable up to £50,000 of your gain and there after at 28%. Other factors, like renovation costs, buying costs and selling costs are some items – that can help reduce the taxes further.

      We feel that in your circumstance, if we dwell down into the costs deeply, we can work out what the gain might look like for taxes. Should you wish to discuss this further we can arrange a quick call to see if there are any other matters we can cover. Should you wish to do this, please kindly email your contact details on hello@legendfinancial.co.uk and one of our advisors will be in touch with you.

      Thank you
      Fahad

  16. Hello
    I have had a 2nd property which I purchased 12 years ago. It has been on rent since then.
    If I were to gift my current property to my children and move into the 2nd property.
    How long would I have to live there for it to be considered my main property and thus avoid CGT?

    1. Dear Tariq,

      Thank you for contacting us in respect of your query.

      The 2nd property will be considered main residence once occupied with the intention of living there permanently. With respect to the point of avoiding CGT on this 2nd property – the first 12 years would not have any relief on them as they were let out – so however the time it is occupied from the move onwards – it will be prorated for the period unoccupied and thus any gain for that period would be taxable.

      I trust the above is clear – but if you wish to discuss this further we can arrange a quick call to see if there are any other matters we can cover. Should you wish to do this, please kindly email your contact details on hello@legendfinancial.co.uk and one of our advisors will be in touch with you.

      Many thanks
      Fahad

  17. Hi

    I am UK resident disposing a land gifted to me 6 years ago in Poland by my father.
    I am aware I need to pay CGT but how do I calculate the gain? Do I use market value of the land from 2016? What documents do I need to have ready for HMRC? Will The sales transactions documents be needed or just a proof of money in my bank account be sufficient?
    The gift transaction document had massively understated value written into it, would that be a problem, making the gain higher than it actually is?

    Thank you

    1. Hi Andrew, thank you for your query.

      The gain will be calculated based on your purchase and selling price, also taking into account other related costs. You would need to keep the transaction documents as an evidence incase enquired by HM Revenue & Customs.

      It would be best to have the purchase document certified again by an independent surveyor to confirm the fair value at the time of gift.

      Should you wish to speak further. we can arrange a call, and if you can kindly share your contact details and a suitable time/date on hello@legendfinancial.co.uk ; one of our tax advisors will be in touch with you.

      Thank you
      Fahad

      1. My mother has just started renting an assisted living flat after the death of my father. if I rent her house out to help pay for her rent and care fees, how would the CGT be worked out? is the starting value of the property for CGT from when my parents purchased the house 30 years ago or the value of the house now? Would she still get the 36 months relief as it was her permanent home for the past 30 years? Thank you

        1. Hi Erica,

          Thank you for your comments on our article here.

          In respect of the CGT, if it was a main residence for all the period of the past 30 years, then there is a potential to claim private residence relief against the gain, however it will need to be assessed thoroughly.

          I would ask, if you could kindly drop us an email on hello@legendfinancial.co.uk with your contact details and we will get one of our advisors to contact you back to discuss this further.

          Many thanks
          Fahad

  18. Hi
    I have a land which is given to me by my grandparents way before i come to uk.Now i want to sell that land and transfer the money to my uk account so i can put this money as a deposit for my first house purchase.
    What i would you like to know is , do i have to pay CGT for this money?
    Best regards

    1. Hi Jem,

      Thank you for your question here.

      Since being a UK resident, you’ll be liable to capital gains tax on the disposal of your worldwide assets.

      However we can discuss this further to see if there are any other factors that can help reduce it.

      We can arrange to discuss this further, if you can kindly leave your contact details and a suitable time/date on hello@legendfinancial.co.uk ; one of our tax advisors will be in touch with you.

      Thank you
      Fahad

  19. My husband and I had a principle residence for 35 years that we sold in April 2022. We purchased a second home for a elderly relative to live in in 2004 who died in 2007. We have kept the second property for 22 years, and used it as a second home, purchased furniture etc, extended and renovated it. We moved out of our principle residence in June 2021 and moved into the second home whilst waiting for the first property to be smartened up and sold. So we have lived in the second home for 12 months and now wish to sell. Can you advise us, do we have to pay CGT? Thank you

    1. Hi Dawn. Thank you for contacting us and providing us on a brief scenario.

      We would need to further understand about second home use between 2007 and 2021 – before working out a conclusion on the capital gains taxes.

      We can arrange to speak with you further in a call or over emails. If you could kindly email your contact details and a suitable time/date for this on hello@legendfinancial.co.uk ; one of our tax advisors will be in touch with you.

      Thank you
      Junaid

  20. I bought a London based one bedroom flat 10 years ago for £172k, i invested around £20k initially on complete redo. I moved to US (where i am now a permanent resident) 3 years after that and it has been rented out for the following 7 years. I am about to sell it for cca £300k.
    What is my best strategy for avoiding CGT – I hear I may be liable for CGT on both ends (in UK and in US!!). I have an 8 year old son that has a trust with his biological US father. Can I put my property in his trust? I am married to another US citizen – and our properties before marriage are not considered joint property, but is there a tax beneficial way of involving him in the London flat ownership in any way?
    What is my best strategy?
    Many thanks in advance

    Sandra

    1. Hi Sandra, thank you for contacting us.

      In your case there are a few matters, firstly CGT calculation surrounding UK and then what options are available under double tax treaty in US, where you’re currently resident.

      Secondly, putting property in trust to your Son – there are certain factors to look at before thinking it’s a better option.

      Thirdly, having your Spouse as a joint owner in the property is always a good move, but you’d need to sure on how it can be managed more tax efficiently.

      We can have a short call at somepoint to cover this up. If you’d be kind enough to email us your details on hello@legendfinancial.co.uk ; one of our tax advisors will be in touch with you and have this discussed further.

      Thank you
      Junaid

  21. Hi,

    My partner bought a buy to sell property with his ex-wife in 2009.
    They divorced and he moved into the property in 2019.

    He bought if for £220,000, spent around £25,000 doing it up and has just sold it for £475,000.
    He has used the excess to buy a house with me.

    As he has lived in the property for the past 3 years, does he still need to pay CGT??

    Thank you

    1. Dear Claire,

      Thank you for approaching us for your query, in the comments section of this article.

      Based on your scenario, it appears that from 2009 to 2019 – the property might not have been left empty, if I am correct in assuming this, and probably let out – if this is the case then yes there will be Capital Gains Tax due on this period of ownership however it will have to be split between your partner and the ex-wife.

      There are other factors to this too – the time of divorce and how the asset was passed on – in order to establish how the capital gains taxes are split.

      If you would like to have this covered in detail, please leave us your contact details on hello@legendfinancial.co.uk and one of our tax advisors will be in touch with you soon.

      Regards,
      Junaid

  22. Hi
    I bought a 2 bed terrace house 25 years ago for 25k
    I spent 10k to renovate it.
    After 5 years I spent 15k to renovate
    After another 8 years spent 7k
    After another 10 tears spent 20k
    Total paid 87k.
    Now I am planning to sell it for 125k.
    But have a mortgage of 85k.
    On how much do I have to pay capital gains tax ?

    1. Hello Khalida,

      • Acquisition Cost: £25K
      • 4 x Renovations: £52K (10+15+7+20)
      • Total: £77k

      Sum of your total spend including adds up to be £77k including the purchase.

      If total cost is £87,000, there will be a gain of £38,000 (sale £125k – £87k cost). Assuming one owner and has never occupied as principle private residence, this gains of £38,000 taxable in the year of sale. Certainly, any selling cost would further reduce the gains.

      If total cost is £77,000, there will be a gain of £48,000 (sale £125k – £77k cost). Assuming one owner and has never occupied as principle private residence, this gains of £48,000 taxable in the year of sale. Certainly, any selling cost would further reduce the gains.

      The gains will be subject to relevant marginal rate of individual. This mean, we need to see how much basic rate band is available, which will be taxed at 18% residential gains and 28% for higher rate taxpayer.

      For more detailed discussion please drop me email on hello@legendfinancial.co.uk, we can book time and have better understanding.

      Thanks
      Fahad

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Fahad Lateef

Fahad is a Chartered Certified Accountant (ACCA), with a motto “When “why” is clear, “how” is easier”. He is proficient in numeracy and impassioned with giving concise advice to a wide range of clients.

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Junaid Usman

Junaid has been instrumental in the achievement of our success across various regions and he specialises in business management, accounting and tax advisory services.

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