Tax when you sell: what is due and when
A sale generates a tax bill with a deadline measured in weeks, not months. Establishing the figure before completion matters.
The tax on a property sale depends on whether it was your main home, whether you owned other property, and how much it has gained in value. For a main residence, principal private residence relief usually removes the charge entirely. For anything else, capital gains tax applies.
The deadline is the part that catches people out. Residential property disposals must be reported and the tax paid within 60 days of completion, rather than by the following January as most tax liabilities are.
What is charged
The charge is on the gain: the sale proceeds minus the purchase price, minus allowable costs. Allowable costs include stamp duty paid on the purchase, legal and survey fees, and the cost of capital improvements — but not repairs, maintenance or decoration, which are treated as revenue expenses.
- Residential property gains are charged at the higher rates of capital gains tax
- Each individual has an annual exempt amount, which is much lower than it once was
- Allowable costs must be evidenced, so keep the paperwork from the original purchase
- Capital improvements add to the base cost; repairs do not
- Losses on other disposals can be offset, and must be claimed within the time limit
Private residence relief
A property that has been your only or main home for the whole period of ownership is usually exempt. Where it has been let or left empty for part of the time, the relief is apportioned, and the final period of ownership is treated as qualifying in most circumstances.
Establishing the qualifying periods is worth doing properly, because the relief is generous and the calculations are not always obvious — particularly where you owned the property before living in it, or lived elsewhere for a period.
Reducing the bill legitimately
The planning that helps is done before the sale, not after. Completing after the start of a new tax year uses a fresh annual exempt amount, and transferring a share to a spouse with lower income can use their exemption and their rate.
Spreading disposals across tax years is the other main lever, though it conflicts with a need for speed. Where the timing is flexible at all, it is worth establishing the difference before fixing a completion date rather than afterwards.
Common questions
- How long do I have to pay capital gains tax after selling?
- For residential property in the UK, the gain must be reported and the tax paid within 60 days of completion. That is far shorter than the self-assessment deadline, and penalties apply automatically for late filing. Make sure the funds are available at completion, because reinvesting the proceeds does not defer the charge.
- Do I pay capital gains tax on my main home?
- Usually not. Principal private residence relief exempts a property that has been your only or main home throughout your ownership. If it was let, or you owned it before living in it, the relief is apportioned and there may be a charge on part of the gain. Take advice if the ownership period was mixed.