Capital Gains Tax: A Guide for Selling Your Buy-to-Let Property

We often act for clients who are thinking of selling their second residential property (often buy-to-let) and are concerned by the Capital Gains Tax (CGT) impact of the sale. We also on occasion act for clients who have already sold their second residential property without discussing this with us first.

We always recommend that our clients discuss the tax aspect of any significant financial decision with us before they act and selling a second residential property is just that both in terms of cash flows and CGT liabilities. For the clients who do not plan the tax aspects of the sale the CGT liability can be an unwelcome surprise.

When calculating the CGT liability the simple approach is to take the sales price and deduct the cost then multiply by the current rate of CGT but it doesn’t stop there. There are other areas that are often overlooked / misunderstood when clients try to calculate the CGT liability themselves such as but not limited to:

1. Understanding the cost price if the property was inherited
2. The percentage of ownership if jointly owned
3. The deduction of legal fees
4. The deduction of major work cost on the property
5. The deduction of Private Residence Relief (PRR)
6. The deduction of Lettings Relief
7. The deduction of the Capital Gains Tax annual exempt amount
8. Understanding whether they are a basic rate or higher rate taxpayer
9. Understanding the rate of capital gain tax to apply to the sale
10. Understanding if they have capital losses brought forward from previous years to offset against the capital gain
11. Understanding their tax residency
12. Understanding the 60-day rule for reporting the Capital Gains Tax and paying it to HMRC

The consideration of all of these factors to arrive at the correct and most tax efficient outcome can be complex for those who are inexperienced.

With our experience in CGT, we are happy to assist to give you the understanding and peace of mind you require before making the decision to sell your second residential property.

If you need Capital Gains Tax Advice, get in touch today.