Lets get to it shall we?
Selling property? Capital gains tax (CGT) can take a big bite out of your profits.
At Pie Tax, we’ve seen the impact of CGT on all types of property sales.
Whether it's a rental, second home, or part of your main residence, knowing the CGT rate can help you save.
Here's your guide to CGT on property in 2024—by income and property type.
Let’s dive in!
Capital Gains Tax Rates for Property in 2024
In 2024, the capital gains tax (CGT) rates for property depend on your income.
For basic rate taxpayers, the CGT rate is 18% on residential property.
But if you're a higher-rate taxpayer, that jumps to 28%.
We always remind clients that calculating your tax bracket means looking at your total income plus any gains.
If your gains push you into the higher rate bracket, you'll end up paying 28%.
It's also important to note the difference between residential and non-residential properties.
Residential properties are taxed at higher rates, while gains from non-residential assets are taxed at lower rates, typically 10% or 20%. Planning can help reduce the sting of CGT!
How to Calculate Capital Gains Tax on Property
In our experience, calculating capital gains tax is straightforward when broken down.
Calculate your total gain by subtracting the property's purchase price from its sale price.
Then, deduct allowable costs like improvements and legal fees to reduce your taxable gain.
Don't forget the annual exempt amount for 2024.
If your gain falls below this after deductions, you might avoid CGT entirely.
It's a simple way to save on your tax bill that many overlook.
Our Personal Tax App can help you keep track of these figures easily.
Always consider the property type, as rules differ for buy-to-let and second homes.
We recommend running the numbers early using our Personal Tax Preparation Software to avoid surprises and maximise available reliefs.
Exemptions and Reliefs for Reducing Capital Gains Tax
At Pie Tax, we help clients use Private Residence Relief (PRR) to avoid CGT on their main home.
If it was your main residence the entire time, you could potentially avoid all CGT.
Even partial relief applies if it was rented out for a period.
For buy-to-let properties, we recommend considering Letting Relief to reduce CGT if you lived there before renting it out.
Despite recent changes, it's still valuable for many landlords.
We also emphasise the annual exempt amount for 2024, allowing individuals or couples to earn a set amount tax-free on their gains.
This can be a significant tax-saving opportunity when strategically applied.
Tips for Minimising Capital Gains Tax on Property Sales
Timing is key when selling property.
We’ve seen clients save a lot by spacing property sales over different tax years to use the CGT allowance twice.
One small timing adjustment can make a big difference in reducing taxable gains.
Another tip is using carried-forward losses.
If you’ve made losses in the past, you can offset those against your current gains.
Lastly, always keep accurate records of allowable costs like legal fees and home improvements.
These deductions add up. And when in doubt, consult a tax adviser.
A tailored plan can help you avoid surprises and minimise your tax bill.
How to Use the Annual Exempt Amount to Reduce Capital Gains Tax
We often recommend using the Annual Exempt Amount to reduce Capital Gains Tax (CGT).
In 2024, individuals have a tax-free allowance for property sales, and couples can potentially double this.
It's a simple yet effective strategy to lower your tax liability.
We suggest selling properties across different tax years to claim the annual exempt amount twice, significantly reducing CGT on multiple sales.
This approach can keep more profit in your pocket.
Staying aware of your yearly gains is crucial to avoid exceeding the exemption limit.
Our Personal Tax App helps monitor gains and maximise your annual exemption, ensuring you don't overpay on CGT.
The Role of Allowable Costs in Reducing Taxable Gains
Allowable costs like home improvements, legal fees, and estate agent fees are key to reducing your taxable gains.
At Pie Tax, we’ve helped clients save thousands by claiming these costs, especially when selling buy-to-let properties.
One client significantly lowered their capital gains tax bill by correctly accounting for renovations.
It’s essential to keep all your receipts. We’ve seen clients almost lose valuable deductions due to misplaced records.
Staying organised ensures you can claim every allowable deduction.
Not all costs qualify, though. Structural improvements count, but routine maintenance doesn’t.
We help clients to identify the right costs to maximise their savings and reduce CGT.
The Benefits of Consulting a Tax Adviser for Complex Property Sales
For more complex property sales, working with a tax adviser can make all the difference.
A client with multiple properties, including an inherited home, reduced their CGT by spreading property sales across tax years with our advice.
We've also helped clients avoid mistakes, like those who needed to transfer property ownership.
With the right strategy from Pie's Personal Tax Preparation Software, they reduced their capital gains tax bill and saved a lot of stress.
Our expertise in navigating complex tax laws has often resulted in significant savings for clients dealing with intricate property portfolios.
Maximising Tax Savings with CGT Allowances
Making the most of CGT allowances can significantly reduce your tax bill.
By understanding how the annual exempt amount applies to your chargeable gains, you can strategically plan property sales to minimise your CGT liability.
For instance, splitting sales over different tax years can help you benefit from the annual exemption multiple times.
Additionally, recognising which chargeable assets qualify for reliefs and exemptions is key.
With our help, clients can leverage every possible allowance, helping them navigate tax rules and reduce their overall liability on complex sales.
Easily Calculate Your Capital Gains Tax with the Personal Tax App
Worried about accurately calculating your capital gains tax on property?
With Pie Tax's Personal Tax App, you can quickly estimate how much CGT you owe based on your specific property sale.
Simply input the property details, allowable costs, and your income, and the app will do the rest.
It ensures you don't miss out on any deductions or exemptions, giving you a clear picture of your tax liability in minutes.
The app even considers factors like Private Residence Relief and Letting Relief, helping you maximise potential tax savings you might have otherwise overlooked.
Final thoughts
Capital gains tax on property can seem daunting, but with the right knowledge, you can minimise how much you pay.
From understanding the tax rates for your income bracket to taking advantage of exemptions like Private Residence Relief, planning ahead is key.
Whether you're selling a second home or an investment property, Pie Tax is here to help you navigate the ins and outs of capital gains tax on property and ensure you keep more of your hard-earned money.
Ready to make a move?
Contact us for expert advice on your next sale!
