By Amal Shah
11 Jan 2022
Last updated: 15.06.2026
The tax treatment of selling a property held in personal ownership is different depending on whether the property was acquired with a view to resale or for rental income and long-term investment.
Those who acquire or develop a property for resale are normally regarded as “trading” and profits on sale are taxable as income, whether the property owner is a resident or non-resident in the UK. Trading income is taxed at rates up to 45%.
Where property is acquired to hold for rental income, this is generally regarded as “investment”. Sales of investment property are normally subject to Capital Gains Tax or CGT for short. Capital Gains Tax (CGT) is a tax on the profit you make when you sell or ‘dispose of’ an asset that has increased in value since you purchased it. To clarify, you are not taxed on the full amount you make from the sale, only the profit or ‘gain’. This would apply to a sale, a transfer to somebody else (such as gifting the property to a child), exchanging it for another asset, or receiving compensation.
Individuals are subject to CGT at 18% or 24% depending on their level of UK income, but a £3,000 annual CGT exemption amount is available. If a property is owned by a trust the rate of CGT is 24%, with a trust only entitled to half of the annual exemption an individual is entitled to (£1,500).
Under most circumstances, you won’t usually be taxed on the sale of your main home due to a tax relief called Private Residence Relief (PRR).
PRR will exempt the gain from CGT when you’re selling a home you have lived in as your main residence for the entire period of ownership. You must meet this and all other PRR criteria to be eligible for the relief. There are a number of scenarios that may limit your entitlement to PRR, including;
So, what qualifies as my ‘main residence’ for Capital Gains Tax purposes? What makes the main residence is a complicated issue in tax law, very simply put it in your home. Home is of course, much, much more than simply where you live and will be relatively easy to identify in most circumstances.
If you own more than one home, you are able to nominate which property you would like to be your main, tax-free residence. This doesn’t have to be the one you live in all, or even most, of the time. You may wish to nominate the property you expect to make the most profit on when you sell it. Once you have purchased a second home, you have two years within which to nominate your main, tax-free residence.
It should be noted that if you are married or in a civil partnership, you can only nominate one property between you.
UK residents selling a home that is not their main residence need to report the disposal to HMRC and pay any Capital Gains Tax due within 60 days of completion. This applies to disposals completed on or after 27 October 2021. For disposals between 6 April 2020 and 26 October 2021, the reporting deadline was 30 days.
This is a significant change from the previous position, where CGT was usually reported and paid through the Self Assessment process by 31 January following the end of the relevant tax year. The disposal should be reported through HMRC’s Capital Gains Tax on UK Property service. If you need assistance with calculating, reporting or paying CGT on a property disposal, please get in touch with one of our capital gains tax accountants, who have significant experience in this area.
Where a UK property is owned and sold by a company, any gain on the disposal is generally subject to Corporation Tax rather than Capital Gains Tax. The applicable Corporation Tax rate depends on the company’s level of profits. The small profits rate is currently 19%, while the main rate is 25%, with marginal relief potentially available for companies with profits between the lower and upper thresholds.
For companies, indexation allowance may be available for periods of ownership up to 31 December 2017, but no indexation allowance is available for periods after that date.
The tax treatment of a property disposal will depend on whether the property is held as a trading asset or as an investment asset. This is a question of fact and will usually depend on the company’s intention at the time the property was acquired, as well as how the property has been used. Different reliefs may be available depending on the circumstances. For example, rollover relief may be relevant where qualifying business assets are replaced, while reliefs such as Business Asset Disposal Relief or Substantial Shareholding Exemption may be relevant in certain share disposal scenarios.
Non-UK residents are not generally within the scope of UK tax on gains, but specific rules apply to UK land and property. Since 6 April 2019, non-residents have generally been taxed on disposals of both residential and commercial UK property, including certain indirect disposals. For non-resident companies, gains from UK property are generally subject to Corporation Tax rather than Capital Gains Tax. In some cases, rebasing or other transitional rules may apply where the property was already owned before the relevant rules came into force. Learn more about non-residents buying and selling UK property.
For further guidance or assistance on any property tax matters contact Amal Shah or our property tax team today.
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