Category: Capital Gains Tax

Selling your UK home and living abroad

If you live abroad and sell your UK home, you may have to pay Capital Gains Tax (CGT) on any gain made since 5 April 2015. Only the portion of the gain made after 5 April 2015 is liable for tax. One of the most commonly used and valuable exemptions from CGT is Private Residence Relief (PRR), which applies when a property has been used as your main family home. Investment properties that have never been your main residence do not qualify for any CGT relief.

For non-UK residents, PRR can still apply, but there are additional conditions. You may not have to pay CGT for any tax year in which you, your spouse, or civil partner spent at least 90 days in the UK home, provided you meet the necessary conditions and nominate it as your only or main home when reporting the sale to HMRC.

Certain parts of the property, such as areas let out, used exclusively for business, or grounds larger than 5,000 square metres, may reduce the relief. You also automatically receive relief for the last nine months of ownership (or 36 months if you are disabled or in long-term care). 

Regardless of whether any tax is due, you must submit a Non-Resident CGT (NRCGT) return and pay any CGT within 60 days of the sale. Penalties apply if the return is late or tax is unpaid by the deadline. Even if there is no CGT to pay the return must still be submitted by the deadline.

What is a demerger?

A demerger involves splitting the trading activities of a single company or group into two or more independent entities. This can be facilitated by distributing the assets of a holding company to its shareholders.

There are special statutory demerger provisions that are designed to make it easier to divide and put into separate corporate ownership the trading activities of a company or group of companies. An exempt demerger will be deemed to occur under these provisions. As a result, the distribution is typically exempt from Income Tax and usually does not trigger any Capital Gains Tax, as the gains are effectively rolled over.

The provisions do not apply where a trading activity is to be sold or becomes owned by a person other than the existing member of the original company.

The provisions allow for the removal of the distribution charge in appropriate circumstances, making the distribution an ‘exempt distribution’. This applies to trading activities only. Companies that utilise the demerger provisions range from small private businesses to some of the largest public companies in the UK.

The legislation also provides for a clearance procedure. Under this a company that wants to demerge trading activities can obtain advance confirmation from HMRC that the distribution that will arise will be an exempt distribution.

Business Asset Disposal Relief – the present rates

If you are thinking about selling a business or shares, it is important to understand how Business Asset Disposal Relief works, particularly with rates set to increase from April 2026.

Business Asset Disposal Relief (BADR) provides a valuable tax advantage, offering a reduced rate of Capital Gains Tax (CGT) on the sale of a business, shares in a trading company or an individual’s stake in a trading partnership.

The present rate of BADR is 14% for disposals made during the 2025-26 tax year. Currently, these rates are set to increase in the 2026-27 tax year starting on 6 April 2026 to 18%. As a result, disposals made after April 2026 will face a higher CGT rate.

These planned changes in the BADR rates can have a significant impact on tax planning for business owners and investors. Furthermore, it is worth noting that upcoming measures in the Autumn Budget could further diminish the benefits of these reliefs.

Despite these changes, the lifetime limit for claiming BADR currently remains at £1 million, which means that individuals can use the relief multiple times, provided their total gains from qualifying disposals do not exceed this threshold.

Changes have also been made to Investors’ Relief. As of 30 October 2024, the lifetime limit for Investors' Relief was reduced from £10 million to £1 million, with CGT rates now aligning with those for BADR at 14% and set to rise to 18% in April 2026.

Claiming lettings relief

If you have tenants in your home, it’s essential to understand the Capital Gains Tax (CGT) implications. Typically, there is no CGT on the sale of a property used as your main residence due to Private Residence Relief (PRR). However, if part of your home has been let out, your entitlement to PRR may be affected.

Homeowners who let out part of their property may not qualify for the full PRR, but they could be eligible for letting relief. Letting relief is available to homeowners who live in their property while renting out a portion of it.

The maximum letting relief you can claim is the lesser of the following:

• £40,000
• The amount of PRR due
• The chargeable gain made on the part of the property let out

Example:

• You rent out a large bedroom to a tenant, making up 10% of your home.
• You sell the property and make a gain of £75,000.
• You qualify for PRR on 90% of the property (£67,500).
• The remaining gain of £7,500 relates to the portion of the home that’s been let.

In this case, the maximum letting relief due is £7,500, which is the lower of:

• £40,000
• £67,500 (the PRR due)
• £7,500 (the gain on the part of the property that’s been let)

As a result, you would not owe any CGT—the £75,000 gain is fully covered by £67,500 in PRR and £7,500 in letting relief.

Note that if you have a lodger who shares living space with you or if your children or parents live with you and pay rent or contribute to housekeeping, you are not considered to be letting out part of your home for tax purposes.

Report and pay Capital Gains Tax

If you have sold a UK residential property since 6 April 2020, it is important to be aware that the reporting and payment deadlines for Capital Gains Tax have changed. For property sales completed on or after 27 October 2021, any Capital Gains Tax that becomes payable must now be reported and paid within 60 days of completion. This applies where the property is not fully covered by the private residence exemption. For example, where the property was a rental property, a second home, or only partly used as your main residence. If the property was jointly owned, each owner must report their own share of the gain.

To calculate the gain, you will need information about the dates of purchase and sale, the original purchase price, legal fees and other costs, plus any significant improvement expenses. Estate agency and legal costs on sale will also be needed. The sooner you gather these details, the easier it is to meet the deadline.

For other types of capital gains, for example shares, investments, or commercial property sold by a UK resident, the reporting is usually carried out through your Self Assessment return for the tax year concerned. In some cases it is possible to report gains in real time, rather than waiting until the tax return is due, but this depends on the circumstances. 

If you use the “real time” Capital Gains Tax service, this is available for UK residents disposing of certain assets (not including UK residential property) in the current tax year. If this route is used, the reporting deadline is by 31 December after the end of the tax year of disposal, with payment due by 31 January.

If you think you may have sold or are planning to sell a property or other asset that could give rise to a taxable gain, please contact us as soon as possible. Early information means that we can ensure the calculations are correct and the reporting deadlines are met, which helps avoid unnecessary interest or penalties.

Business Asset Disposal Relief changes

Business Asset Disposal Relief (BADR) offers a significant tax benefit by reducing the rate of Capital Gains Tax (CGT) on the sale of a business, shares in a trading company or an individual’s interest in a trading partnership.

On 6 April 2025, the BADR CGT rate increased from 10% to 14% for disposals made in the 2025–26 tax year. However, the rate is set to rise again from 6 April 2026, to 18%. This means that qualifying disposals made after April 2026 will be subject to a higher CGT rate once again.

The lifetime limit for claiming BADR remains at £1 million, allowing individuals to claim the relief multiple times as long as the total gains from all qualifying disposals do not exceed this threshold.

In addition to changes to BADR, there were also changes to Investors’ Relief. Since 30 October 2024, the lifetime limit for Investors' Relief has been reduced from £10 million to £1 million. The CGT rates for Investors' Relief also align with those for BADR, currently set at 14% and also rising to 18% from April 2026.

These increases in CGT rates are significant and will impact tax planning strategies for business owners and investors. It is also important to note that further changes may be announced in the forthcoming Budget that could further chip away to the benefits of this relief.

The present limits for Business Assets Disposal Relief

Business Asset Disposal Relief (BADR) still offers a valuable tax break, but the CGT rate has risen to 14% from April 2025 and will increase again to 18% in April 2026.

BADR provides a valuable tax advantage by offering a reduced rate of Capital Gains Tax (CGT) on the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership.

The limits for BADR increased for disposals made on or after 6 April 2025. This has seen the CGT rate now applied at a rate of 14% (up from 10%). This change is now in effect and applies to any qualifying disposals taking place within the 2025–26 tax year.

The rate is set to increase again from 6 April 2026, to 18%. This means that disposals qualifying for BADR on or after this date will face a significantly higher CGT rate when compared to the previously long-standing 10% rate.

The lifetime limit for claiming BADR remains at £1 million, allowing individuals to benefit from the relief more than once, provided the cumulative gains from all qualifying disposals do not exceed this threshold.

Additionally, changes have been made to Investors’ Relief. The lifetime limit for this relief was reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. In addition, the CGT rates for Investors’ Relief are now aligned with those for BADR, currently set at 14% and increasing to 18% from April 2026.

Found objects and Capital Gains Tax

Items discovered lying on land or buried in the soil, such as antiques or historical objects, are treated as chattels for Capital Gains Tax (CGT) purposes. This remains true even if ownership is tied to the ownership of the land where the item was found. Since these objects were not intended to be permanently affixed to the land, they are not considered fixtures and are therefore treated as movable personal property.

As chattels, these objects may benefit from specific CGT exemptions. The chattels exemption generally applies to items with a predictable useful life of 50 years or less. Common examples of chattels include household furniture, artwork, antiques, silverware, motor vehicles, and machinery not permanently installed in a building.

Gains from the sale of chattels are exempt from CGT if the sale proceeds are £6,000 or less per item. If the proceeds are between £6,000 and £15,000, marginal relief may apply. In these cases, the gain is the lower of the actual gain or 5/3rds of the amount above £6,000. Where a set is sold the £6,000 limit applies to the set and there are special rules to sets that have been broken up and sold separately.

Capital Gains valuations of goodwill

Who values goodwill when a business is sold? HMRC's Shares and Assets Valuation team takes the lead.

Whether the goodwill belongs to a sole trader, partnership or limited company, HMRC’s SAV team will either accept the submitted valuation, give their own open market estimate, or state they need more information.

For non-corporate goodwill, the SAV team have the following options for valuing goodwill:

• Accepting the valuation
• Providing an opinion of Open Market Value if the claim appears under or overvalued
• Stating that insufficient information is available to form a view

Corporate goodwill valuations are usually submitted directly to SAV as informal or formal requests. When Trade Related Property is involved, the SAV team will liaise with the Valuation Office Agency.

These are the key issues the SAV team will look at when valuing goodwill:

• the full sale and purchase documentation relating to the transfer of both tangible and intangible assets;
• succession arrangements;
• the valuation approach used – e.g. capitalisation of profits, super profits or a trade specific method;
• the activities of the business and role of the owners within it;
• the financial statements/accounts (including the detailed trading and profit and loss account) for the 3 years before valuation;
• any other relevant financial information;
• appropriate yield and multiples of comparable companies and sectors;
• the commercial and economic background at valuation date;
• how the personal goodwill of the owner has been reflected in the valuation; and
• any other relevant factors.

Open market value must exclude any assumptions about a "special purchaser" unless industry norms support synergy-based premiums.

File and paying CGT after property sales

Capital Gains Tax on certain residential property sales must be reported and paid within 60 days to avoid penalties and interest.

The annual exempt amount applicable to Capital Gains Tax (CGT) is currently £3,000. CGT is normally charged at a simple flat rate of 24% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 18%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 24% CGT. 

These rates also apply to gains from the sale of residential property, except for a principal private residence (PPR), which is usually exempt from CGT. Most homeowners don’t pay CGT when selling their main family home but gains from other types of property may be taxable.

This includes:

• Buy-to-let properties
• Business premises
• Land
• Inherited property

Any CGT due on the sale of UK residential property must usually be reported and paid within 60 days of the completion date. This means a CGT return must be submitted and a payment on account made, within that 60-day window.

Failing to meet the deadline can lead to penalties and interest, so it’s important to plan ahead and ensure timely reporting whenever a non-PPR property is sold. And if required, we can help you with the computations and filing formalities.