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Chartered AccountantsChartered Accountants

Rental Property - Capital Gains Tax

In simple terms, on disposal of a buy to let property, Capital Gains Tax (CGT) is potentially payable on the proceeds on disposal of the property less its original purchase price.  After deducting an Individuals CGT Annual Exemption, currently £10,600, the remaining balance will be taxed at 18% or 28% or a combination of these rates dependent on the total Taxable Income and Gains of the individual.

For income and gains up to £31,785 the rate of 18% applies, for income and gains over £31,785 the rate is 28%.

It is quite common for Rental properties to have been an individual’s main home or ‘Principle Private Residence’ (PPR).  Where this is the case, the period during which the property was their only or main home will be exempt for tax as will the final three years of ownership, regardless of whether the property was let during this final period.   In addition a further relief ‘Private letting relief’ will be available on a property which has been your PPR.  The relief available is the lower of:
1. The gain exempted under PPR relief
2. The gain arising as a consequence of letting
3. £40,000

For the rules on the Capital Gains tax reliefs available on Furnished Holiday Lets see that section of the website.


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