Buy-to-Let Guide

Capital Gains Tax - When selling your residential property

When you dispose of your home or “main residence”, there is no capital gain arising on the disposal of the property as this is covered by PPR (Principle Private Residence Relief).

The same exemption does not exist for buy to let properties.

In simple terms, when a buy-to-let property is sold then capital gains (CGT) tax will be due on the difference between the sale proceeds and the costs of the original purchase of the property.

If this is a negative figure, then no CGT is due and the loss can be used against other gains arising in the same year. Alternatively, if unused, it can be carried forward and used against future gains.

If you used to live in the property before you used it as a buy-to-let, the following exemptions will apply:

• The last 18 months of ownership will be exempt from CGT
• Any actual periods of occupation as your main residence will be exempt
• If you were working abroad for a period of time and did not occupy another property qualifying for relief
• Lettings relief to a maximum of £40,000

There may also be tax planning opportunities to reduce CGT liabilities by transferring property between spouses or civil partners. Please contact our experts for further guidance.