7. Capital Gains Tax rates

You pay a different rate of tax on gains from residential property than you do on other assets.

You don’t usually pay tax when you sell your home.

If you pay higher rate Income Tax

If you’re a higher or additional rate taxpayer you’ll pay:

  • 28% on your gains from residential property
  • 20% on your gains from other chargeable assets

If you pay basic rate Income Tax

If you’re a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.

  1. Work out how much taxable income you have - this is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.

  2. Work out your total taxable gains.

  3. Deduct your tax-free allowance from your total taxable gains.

  4. Add this amount to your taxable income.

  5. If this amount is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on residential property) on any amount above this.

Example

Your taxable income (your income minus your Personal Allowance and any Income Tax reliefs) is £20,000 and your taxable gains are £12,300. Your gains aren’t from residential property.

First, deduct the tax-free allowance from your taxable gain. For the 2017 to 2018 tax year the allowance is £11,300, which leaves £1,000 to pay tax on.

Add this to your taxable income. Because the combined amount of £21,000 is less than £33,500 (the basic rate band for the 2017 to 2018 tax year), you pay Capital Gains Tax at 10%.

This means you’ll pay £100 in Capital Gains Tax.

If you have gains from both residential property and other assets

You can use your tax-free allowance against the gains that would be charged at the highest rates (for example where you would pay 28% tax).

If you’re a trustee or business

Trustees or personal representatives of someone who’s died pay:

  • 28% on residential property
  • 20% on other chargeable assets

You’ll pay 10% if you’re a sole trader or partnership and your gains qualify for Entrepreneurs’ Relief.