Capital Gains Tax (CGT) is paid on the profit when you sell or ‘dispose of’ an asset that has increased in value.
Most people are aware that when they sell their main residence no CGT is due because the gain is covered by the Principal Private Residence (PPR) relief.
But the rules are different if it is your second home, you are a landlord or you are living abroad, as you will normally need to pay CGT on any gain.
This gain must be reported by taxpayers by filing a CGT return within 60 days of completion. They must also make an advance payment where CGT is due within this timeframe.
The various reliefs and allowances that apply to CGT on residential property mean that making this calculation and submitting the payment is quite an onerous task, so taxpayers will need to begin preparations for CGT before the completion of the transaction.
Lettings relief on residential properties which have been let but which were once the owner’s main home have been severely restricted from 6 April 2020.
As a result, lettings relief will only be included in the CGT calculation where the owner of the property was in shared occupation with the tenant.
