Complete the form below to ask us a question or make an enquiry. We’ll get back to you via phone or email as soon as possible.

Insights

Do I have to pay Capital Gains Tax when selling your home?

Posted on 26th October 2020 in Residential Property, Later Life Planning

Posted by

Rachael Morley

Partner & Solicitor
Do I have to pay Capital Gains Tax when selling your home?

Capital Gains Tax is a tax on the profit when you sell something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.

You may not be aware that you do not have to pay Capital Gains Tax when selling your home, but the detail of the rules are a little more complex than this though.

Capital Gains Tax is not due when each of us sell our ‘principal private residence’, but this is actually subject to limits on the size of the garden. The Revenue only allow the relief to apply to a ‘permitted area’, of either half a hectare or, subject to persuasion, the plot required for the ‘reasonable enjoyment of the dwelling-house’. As you can imagine, this can be a little subjective!

In a recent case, the home in question was a five bedroom, three bathroom property, with a garage for three cars, one-bedroom cottage, swimming pool and around one hectare of grounds. The couple who owned it decided to sell to a housing developer, after the developer acquiring the surrounding fields. They did not declare the sale for Capital Gains Tax, thinking that it was free from tax.

The Revenue swooped in further down the line, having combed through stamp duty records on numerous property sales, as is usual. They gave the couple a bill for a staggering £162,820, being the Capital Gains Tax due on the excess above half a hectare.

Unsurprisingly, this was not the most welcome news for the couple and they decided to appeal it, on the basis that all the garden was needed for the property’s reasonable enjoyment.

Thankfully, the tax tribunal judges agreed. Rather than simply considering comparable properties in the area, the judges also looked at the specific facts and decided that it was reasonable for the house’s grounds to extend a little further than usual. The CGT bill was reduced to nothing.

This was a victory for the taxpayer, but only on the particular facts in play. The lesson here is to never assume with taxes and always to seek advice if in doubt.

 

For any support with residential property sales, contact our dedicated Residential Property team. Or for any help with taxes, please talk to our Later Life Planning team.

Contact our legal experts

 


 

Paper plane

 

Get the latest news straight from our legal experts.

Subscribe to our newsletter to recieve current, dedicated, suppport and guidance from our solicitors straight to your inbox, wherever you are.

Subscribe

Company & Industry

Related Insights

Insights

Eight Things to Consider When Selling a House

Posted on 23rd March 2023 in Residential Property

The conveyancing process can be daunting, but conveyancers provide a valuable service by handling many of the more challenging tasks. Selling a house involves numerous legal issues, such as obtaining an Energy Performance Certificate and completing Property Information Forms. Other key considerations include property boundaries, Capital Gains Tax, and the conveyancing process itself.

Posted by

Nick Conner

Partner and Solicitor
Insights

Eight Things to Consider When Buying a House

Posted on 20th March 2023 in Residential Property

Buying a house is one of the most significant investments that most people make in their lifetime. Whether you are a first-time buyer or an experienced property investor, the process of buying a house can be daunting and complex.

Posted by

Nick Conner

Partner and Solicitor