When buying a new house in the UK, there will be certain tax deductions you will need to be aware of. If you have bought a house in the past you might also be eligible to claim back certain tax you might have overpaid. CapEx Associates specialises in tax-related services, and we have put this guide to help you stay informed on the latest property-related tax deductions.
What Tax You Might be Expected to Pay
Depending on whether you’re buying or selling a home, tax rules will differ. They will sometimes be slightly different if you live in Scotland, England, Wales or Northern Ireland. You can expect to pay::
- Stamp Duty Land Tax when you buy a home in England
- Land Transaction Tax when you buy a home in Wales
- Capital Gains Tax when you sell a home
Stamp Duty Land Tax When Buying a New House
When you’re buying a new property in England or Northern Ireland you might have to pay a tax known as Stamp Duty Land Tax . For Scotland, this is Land and Buildings Transaction Tax and in Wales it’ Land Transaction Tax. In England and Northern Ireland SDLT is applied when you’re purchasing a property over £125,000 or a non-residential property of over £150,000. Depending on how much the property is worth, whether it’s your first property and its location there are different rates of tax to be applied. In general, the more expensive the property is, the higher rate of tax will apply. An additional 3% surcharge will apply if you’re buying an additional second home or a buy-to-let property.
July 2020 SDLT Holiday
In July 2020 Chancellor Rishi Sunak announced that the Government was scrapping SDLT on house purchases up to £500,000 until 31st March 2021 in a bit to breathe some much-needed fresh air in the real estate market, suffering from the COVID-19 pandemic. The new changes to SDLT were welcome by property investors and estate agents alike, as well as those looking to invest in property over £500,000. As stamp duty land tax is tiered, the removal of it for properties under £500,000 also meant a decrease for more expensive properties.
Capital Gains Tax When Selling a Property
TIf you’re on the other side of the property purchase deal, you might need to consider the Capital Gains Tax. Whether or not you’ll be liable to pay CGT on the money you make from a property sale depends on whether the property was classified as your home – or the main property you have occupied for the last 3 years. Selling your main residence in the UK will relieve you of paying CGT, because you can claim Private Residence Relief on any profit, subject to meeting certain conditions. However, if you have let out some or all of your main residence during the ownership period, you might need to pay Capital Gains Tax. If you’re selling any other property, such as a holiday home or a rental property, you won’t be able to claim Private Residence Relief and you might need to pay CGT. As a basic-rate taxpayer in the UK, if you sell property in the UK, you’ll have to pay an 18% tax on any profit. If you’re a higher, or additional-rate taxpayer you’ll be paying 28% above an annual CGT tax-free allowance of £12,000 for the 2019/2020 tax year. Couples can also combine their allowances, meaning that they can gain £24,000 before having to pay CGT.