Capital Gain is the amount of money a seller gets while selling the property. It is the difference between the buy price and sells price for any property. However, as per the rule, the capital gain is considered as profit and income and is taxable. In 2017, a basic taxpayer has to pay 18% of capital gain, and higher rate and additional rate taxpayers would pay 28% of the gain. However, it is not necessary for the seller to pay tax every time. There are some rules for the capital gain taxes on residential property which should be kept in mind.
The capital gain taxes should not be paid if the property is the main residential home for the seller. However, if you have more than one property, and you sell the non-residential one, then you need to pay the capital taxes on residential property. There is no certain rule on that specifies the criteria for the main residential property. So, a person can declare the higher value property as the main residential even if he or she does not live there. Also, for a married couple, both cannot declare two different properties as main residential properties. However, the unmarried couple can do that. In short, the capital gain taxes are subject to the properties that are non-main residential property.
There are certain criteria when you need to pay capital gain taxes. Here are some of the most common situations that people come across.
There are many other situations where you need to pay the capital gain tax. Here are some of the most common and important conditions that you must know.
If you let out your home, during the conveyancing, you may need to pay the capital gain tax. However, the last 18 months of ownership and any period when you have genuinely used the home as the main residence is exempted from it.
You may inherit property from your parents. However, apart from the inheritance tax, you may be eligible for the capital gain tax as well. The increase in value is considered to be the difference between the selling price and the market price when the property was inherited. The seller may need to pay both the taxes depending on the price of the property, tax brackets, and the market value.
Every person is exempted for £11000 of capital gain tax. So, during calculation, it should be subtracted. However, you must consult an efficient solicitor to discuss and understand the concept of capital gain tax while selling the property. NBM Law Firm has accredited solicitors who are expert and experienced on CGT and can help the seller in this regard.