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 risen; 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.

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:

• Capital Gains Tax (CGT)
• Inheritance Tax
• Income Tax

Let’s delve deep into these taxes.

1. Capital Gains Tax (CGT)

CGT is a common tax on profit earned from selling property that isn’t your primary residence. If the property’s value has increased since you bought or inherited it, CGT is due on that gain.

CGT Rates (as of 2023/24)

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

CGT Exemptions

You may be exempt from CGT if:

• The property is your main residence.
• You haven’t rented out part or all of the property.
• No part of the property is exclusively for business.
• The land area doesn’t exceed 5,000 square metres.
• You didn’t buy the property primarily to make a profit.

If these conditions apply, Private Residence Relief may allow you to avoid CGT. However, if any of these conditions don’t apply, CGT could be owed.

CGT Allowance

The CGT allowance for individuals in 2023/24 is £6,000 (down from £12,300 in previous years). Only gains above this amount are subject to CGT.

2. Inheritance Tax (IHT)

If you inherited the property and the estate’s value exceeds £325,000, IHT may be due. This tax is typically 40% on any value above the threshold and is due six months after the person’s death. Late payments may incur interest.

Example

If the inherited property is worth £500,000, you’ll pay IHT on the difference:

• £500,000 – £325,000 = £175,000
• 40% of £175,000 = £70,000 IHT due

3. Income Tax on Rental Income

If you earned rental income from the property, you’ll need to pay Income Tax on the profits. This rental income tax is due separately from CGT and may affect your total tax due when selling the property.

How Accotax Can Help!

Now you have got the answer: 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.

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