do you pay tax when you sell your house UK

Do you Pay Tax When you Sell Your House in the UK?

Do you pay tax when you sell your house or property in the UK? The answer is tricky, as it depends on many factors and individual circumstances. However, typically, you need to pay taxes if your property value has raised; you have inherited the property/house or you are making money through it by letting. Let’s find out exactly what taxes you need to pay when you sell your house in the UK.


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Do you Pay Tax When you Sell Your House in the UK?

In most cases, yes. However, it depends on your circumstances and multiple factors. When selling your home or property in the UK, there are a few taxes that you may encounter. These are:

Let’s delve deep into these taxes.


Capital Gains Tax (CGT)

The most common tax while selling a property is Capital Gains Tax (CGT). This is the tax that you might need to pay if you have earned a profit from the property that you have inherited or bought. Inheriting a property has its own benefits and downsides due to the tax implications. It means if the value of property or house has raised its value from the time you inherited or bought it, then when you sell it, you need to pay CGT on the amount of gain you made.


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The rate of CGT varies based on various factors like the gain size and your income. If you sell a residential property and earn a gain, you need to pay 18% CGT on the basic rate and if it is over the basic rate, you will pay 28% of CGT on your house.

However, you are not required to pay CGT if the following conditions apply:

  • Your house is your main residential home, where you are living all the time
  • You have not let a portion of it out or whole to anyone
  • The part of a house is not used exclusively for business purposes (like a room, etc)
  • The area of your home, building or land is less than 5,000 square metres
  • You didn’t buy it to get a gain

So, if all the above-mentioned conditions apply, you would be entitled to Private Residence Relief and you won’t have to pay any tax on it. However, if some or any of the following apply, you may need to pay tax.

The CGT you are going to pay will be the excess of your Capital Gains Tax Allowance that is £12,300 (2021-22).


Learn more: How to Avoid Capital Gains Tax on Gifts?


Inheritance Tax (IHT)

If the estate you inherited exceeds the market value of £325,000, you are required to pay inheritance tax. The IHT is due 6 months after the death of the person. In case of paying late, you will need to pay the interest. This rate of IHT is 40% on anything over the threshold. It means that if the value of your house is £500,000, you need to pay 40% IHT on £175,000 (£500,000 – £325,000)

Find more about inheritance tax and how to reduce it here.


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Income Tax

If you have given a house on let, you need to pay income tax on the amount of profit you gained from the rental income. This need to be considered when you are going to sell your house.


Find out the ways to reduce taxes as a landlord.


How Accotax Can Help!

Now you have got the answer to: do you pay tax when you sell your house in the UK? There are three main taxes you might encounter whilst selling your house or property: Capital Gains Tax (CGT), Inheritance Tax (IHT) and Income Tax.

If you are planning to sell your house, we have a team of property accountants in the UK to save you from taxes. Additionally, we will also assist you with the tax implications whilst selling your house as per your circumstances. Taking professional help can protect you from errors, heavy bills and penalties.


So, you need to save your hard-earned money by taking the services of an accountant. The accountant will manage your taxes and will provide professional advice to mitigate your tax burden!


In this regard, our tax advisors and property accountants in the UK are worth considering. Accotax is known for its quality accounting and taxation services at a competitive price. Get an instant quote right away!


Disclaimer: This informative blog contains general information about the topic.

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