🏡 Capital Gains Tax (CGT) on Residential Property

What Can You Claim & What Reduces Your Tax?

When you sell a residential property that isn’t fully exempt from tax, you may need to pay Capital Gains Tax (CGT) on the profit (gain).

The good news is—there are a number of allowable costs and reliefs that can significantly reduce the taxable gain.

📊 How the Gain is Calculated

At its simplest:

Sale Price
LESS Purchase Price
LESS Allowable Costs & Reliefs
= Taxable Gain

✅ Allowable Costs (What You CAN Deduct)

1. 🧾 Purchase Costs

These are added to your original purchase price:

  • Stamp Duty Land Tax (SDLT)
  • Legal / solicitor fees on purchase
  • Survey fees
  • Land Registry fees

👉 These increase your “base cost” and reduce the gain.

2. 🏗️ Capital Improvements (Not Repairs!)

You can claim for enhancements that improve or add value to the property:

  • Extensions (e.g. loft conversion, conservatory)
  • New kitchen or bathroom (if an upgrade, not like-for-like replacement)
  • Structural alterations
  • Adding central heating (if not previously installed)

❗ Important:
Repairs and maintenance (e.g. painting, fixing a boiler) are NOT allowable for CGT—they should be claimed against rental income instead.

3. 💼 Selling Costs

Costs directly related to the sale:

  • Estate agent fees
  • Solicitor/legal fees on sale
  • EPC costs
  • Advertising costs

🚫 What You CANNOT Claim

  • Mortgage interest
  • Insurance
  • Utility bills
  • General maintenance/repairs (unless capital in nature)
  • Your own time or labour

🌟 Key Reliefs Available

🏠 Private Residence Relief (PRR)

If the property was your main home, you may get full or partial relief.

You qualify if:

  • You lived in the property as your main residence

Relief includes:

  • The period you lived there
  • The final 9 months of ownership (even if not living there)

👉 If fully covered → No CGT to pay

🏢 Lettings Relief (Limited Use Now)

Only available if:

  • You lived in the property at the same time as your tenant

Maximum relief:

  • £40,000 per owner

📉 Capital Losses

If you’ve made losses elsewhere (e.g. shares or other property), these can be used to reduce your gain.

💷 Annual Exemption

Each individual has a tax-free CGT allowance:

  • £3,000 (current rules)

👉 Gains below this = no tax

💰 CGT Rates on Residential Property

For individuals:

  • 18% (basic rate band)
  • 24% (higher/additional rate band)

👉 The rate depends on your total taxable income.

⏰ Reporting & Payment Deadlines

You must:

  • Report the gain to HMRC
  • Pay any CGT due

⏱️ Within 60 days of completion

⚠️ Common Mistakes to Avoid

  • ❌ Forgetting to include purchase/sale legal fees
  • ❌ Claiming repairs instead of capital improvements
  • ❌ Missing the 60-day deadline
  • ❌ Not declaring rental periods correctly
  • ❌ Forgetting joint ownership splits the gain

💡 Practical Tips

  • Keep all invoices for improvements and legal costs
  • Make a note of dates you lived in the property
  • Track rental periods carefully
  • Speak to us before selling for tax planning opportunities

🤝 How We Can Help

At DMO Accountants, we can:

  • Calculate your CGT position
  • Maximise reliefs available
  • Prepare and submit your CGT return to HMRC
  • Advise on tax planning before disposal