Navigating Capital Gains Tax on UK Residential Properties with Rental Income (2023/24)

When dealing with Capital Gains Tax (CGT) in the UK, especially for properties that have garnered rental income and aren’t the primary residence, it can seem complex. Here’s a simplified guide tailored for the 2023/24 tax year:

1. What is Capital Gains Tax (CGT)?

In the UK context, CGT is levied on the profit or gain when selling or disposing of assets like non-primary residences, shares, or other valuable items.

2. Rental Properties vs. Primary Residences:

While the primary or main residence benefits from Private Residence Relief, making it typically exempt from CGT, properties with rental income are usually treated as investments, potentially incurring CGT upon sale.

3. Rental Income and CGT Implications in the UK:

• Private Residence Relief: Even if a property has been rented out, if it was your main residence at some point, you might still qualify for partial CGT relief for the period it was your main home, plus an additional 9 months.

• Letting Relief: As of recent changes, letting relief is only available if you shared occupancy with your tenant, reducing CGT further for such scenarios.

4. CGT Calculation for 2023/24:

Using a hypothetical £25,000 gain from a property sale:

• Basic Rate Taxpayer:

• Assuming the tax-free CGT allowance is £6000.

• Subtracting the exemption from £25,000 results in £19,000 taxable.

• Property CGT for basic rate taxpayers is 18%, making the tax liability £3,420 (£19000 * 0.18).

• Higher Rate Taxpayer:

• After applying the £6,000 exemption, the taxable amount remains £19,000.

• For higher rate taxpayers, property CGT stands at 28%. This means a tax bill of £5,320 (£19,000 * 0.28).

5. 2023/24 Deadlines for CGT Payment:

For the 2023/24 tax year:

• Taxpayers must report and remit the CGT owed to HMRC within 60 days of the property sale’s completion using the “Capital Gains Tax on UK property account.”

• Penalties and interest apply for late submissions and payments.

6. Conclusion:

While the landscape of Capital Gains Tax in the UK continues to evolve, being informed about the current rules, especially for properties with rental histories, is crucial. Always seek professional advice tailored to your unique situation for accurate and up-to-date insights.

Note: It’s essential to check the most recent HMRC guidelines or consult with a tax advisor for specific rules and updates.