Are you thinking of selling your home? If so, you’re likely wondering if there’s a tax on selling a house. Selling your home is a big step, and certain taxes may be involved. To learn more about whether you have to pay tax on property sales in 2025, continue reading.
Home Sale and Taxes: What You Need to Know
What do you need to know about taxes on selling a house? Tax implications apply depending on your circumstances. Let’s take a look at two alternative situations.
Situation 1 – Selling Your Main Residence
If you’re selling your main and only residence, you likely won’t have to pay any Capital Gains Tax (CGT) on the profit from your sale – all thanks to Private Residence Relief.
However, you must meet a range of criteria for this tax relief. Inheritance Tax may also be applicable, but should have been paid already by the estate of the person who died before you took over the property.
Situation 2 – Not Selling Your Main Residence
If you’re selling either a second home or a buy-to-let property, you must pay Capital Gains Tax on sale profits made above your yearly Capital Gains Tax allowance. The same rule of Capital Gains Tax for the sale of a property applies to inherited properties, too, unless the property has been transferred between civil partners or spouses.
What Taxes Do You Pay When Selling a House?
So, what tax do you pay when you sell a house? As discussed, the two main taxes to be aware of are Capital Gains Tax and Inheritance Tax.
Capital Gains Tax
Capital Gains Tax applies to gains made on a property sale, not the whole amount you receive. For example, if you purchase a second home or buy-to-let property for £200,000 but sell it for £280,000, then you would have to pay Capital Gains Tax on the £80,000 profit.
However, if your gains are under your Capital Gains Tax-free allowance, you won’t have to pay Capital Gains Tax at all.
Inheritance Tax
If you inherit a home in the UK, you may need to pay some Inheritance Tax. However, Inheritance Tax is usually paid by the estate of the deceased, not necessarily when you inherit the property – this means that you presumably won’t have to worry too much about paying Inheritance Tax when you sell your inherited property.
Saying this, if the estate didn’t have enough funds to cover the Inheritance Tax, certain assets (such as your inherited property) may need to be sold to cover the tax bill. Capital Gains tax also applies to inherited properties.
How Much Tax Do You Pay When Selling a House?
If you’re selling a second home, Capital Gains Tax applies. The amount of Capital Gains Tax you’ll be required to pay varies:
- Basic-rate taxpayers – 18% on gains
- Higher and additional-rate taxpayers – 28%
Learn more about Capital Gains Tax rates here.
Calculating Capital Gains Tax
Calculate how much Capital Gains Tax you may need to pay in five simple steps:
- Figure out the gain made on the sale of your property by subtracting the purchase price and allowable costs from the sale price
- Deduct costs, such as stamp duty, renovations, and any professional fees regarding payment to solicitors or estate agents
- Deduct your annual Capital Gains Allowance
- Apply the correct tax rate (either the basic or higher rate)
- Report and pay the required amount of Capital Gains Tax to HMRC by the deadline
When Do You Need to Pay Tax After Selling a House?
If you need to report and pay Capital Gains Tax on profit made from selling your second home, buy-to-let property, or inherited property, you must do so within 60 days of the sale completion. If you fail to pay by the 60-day deadline, you could face penalties and interest from HMRC.
Can You Minimise Your Capital Gains Tax Bill?
Yes, you can legally minimise your Capital Gains Tax bill. Potential methods include:
- Taking full advantage of your Capital Gains Tax-free allowance
- Deducting all allowable expenses from your gains
- Selling your property during a lower income tax year
It’s advisable to seek professional support to ensure your Capital Gains Tax bill is calculated accurately, helping you legally minimise the payable amount.
Recap
- If you’re selling your only and main residence, you likely have no tax to pay
- If you’re selling your second home, buy-to-let, or inherited property, you likely have to pay Capital Gains Tax on gains made from the sale
- If your property is inherited, you may have to sell assets (such as your property) to cover Inheritance Tax
Let’s Manage Your Capital Gains Tax Bill
At LJS Accounting Services, we offer expert support and guidance to clients looking to minimise their Capital Gains Tax bill. Our personal tax service makes dealing with tax implications simple.
We have over 10 years of experience and a wealth of experience managing clients’ tax affairs. We can calculate your final tax bill accurately, helping you avoid any late fines or penalties.
To find out more about how we can help with paying taxes after selling your home, please contact us today.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
