What are the tax implications when you sell your house?
The Property Buying Company is the right choice if you're looking for speed, convenience and assurance,
On this page we'll be taking a look at what taxes you may have to pay when selling your property and in which circumstances, you can find out exactly what you need to know below:
The answer is tricky, there could be taxes involved in selling your home but it depends on your situation. The typical situations that you may have to pay taxes are if you have inherited the property or if you have made money off of it through renting.
When selling your property there are a few taxes that you could potentially come across, here are the few taxes that you may encounter:
As described above there are three types of taxes that you may have an interest in if you're looking to sell your property, here's a look into each of them:
Capital Gains Tax (CGT)
This something you have to pay if you sell a property you've inherited at a profit.
Inheriting a property can be a curse & a blessing due to this tax. If a property has increased in value from the date the owner died to the time of the sale then you may get taxed for this.
The tax applies if for example the property value when the owner dies is £100,000 but when you come to sell it you get £150,000, you will be taxed on that £50,000 profit you have made. On this additional gain basic rate tax payers will pay 18% but higher or additional rate tax payers will have to pay 28%. It's worth keeping in mind as well the CGT will be included in working out your tax status for the year and could push you into a higher tax bracket.
Another thing to consider is that everyone gets an annual CGT tax-free allowance of £12,000 (In 2019/20).
Inheritance Tax (IHT)
If the estate that you've inherited exceed the market value of £325,000 then you will have to pay inheritance tax which is due six months after the persons death and if not paid in this time you will be charged interest. The tax is a significant one and is set at 40% on anything over the value threshold, meaning if the house is valued at £400,000 you will be charged 40% of £75,000, so £30,000.
If you decide to rent out your property then you will have to pay tax on any profit you've made, which is something to consider if you are planning on selling it.
In some circumstances there are situations that you may not have to pay some of these taxes so it is worthwhile knowing all of your options, you may want to seek professional advice around this.
Avoiding Capital Gains Tax (CGT)
If the property is your home and you’ve lived there most of the time or have lived there within the last three years, you can claim Private Residence Relief on profit made from its sale. This means you won’t pay Capital Gains Tax. You must not have ever rented out any part of the house (having a single lodger does not count towards this) or used any of it solely to conduct business. You must also not have bought the property simply to make a profit. Similarly - married couples are only allowed to count one property as a main home at any one time.
There are a few other situations where you don’t usually have to pay CGT:
Selling a property that is a rental, holiday let, land or inherited property means you can’t claim Private Residence Relief and may need to pay CGT.
Avoiding Inheritance Tax
It's a little more tricky to avoid inheritance tax, if you've been left with the property and are due to pay it there isn't much you can do, however you can always pre-plan for an inheritance situation.
If you want all the ins & outs then Which.co.uk have a great guide on how you can potentially lower the amount of inhertiance tax that you pay.
Avoid Income Tax
Unfortunately if you are renting a property out this is seen as earning and falls under income tax, which you are unable to avoid.
Tax on selling a property can be a pretty complex and confusing subject, if you're still unsure of what you may owe or if there is anyway to reduce or avoid the tax all together then it is worth seeking the advice of a law professional.
As cash buyers, we buy any property, in any condition, in any location. If you want to sell your property quickly or want to find out more about how we can help, then get in touch today. All legal fees are included in our service so what we quote you is what you’ll receive.
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|Your options||Average sale length||Typical cost to you|
|The Property Buying Company||2-3 weeks||£0.00|
|Other House Buying Companies||2-10 weeks||£1000|
|Property Auction||6-10 weeks||£2500-£5000|
|Online Estate Agents||16-52 weeks||£1000(upfront)-£5000|
|Estate Agents||16-52 weeks||£5000|
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