23rd January 2023

What the changes to the Capital Gains Tax allowance mean for you

If you’re a landlord or second home owner, you won’t have failed to notice a forthcoming change to the Capital Gains Tax allowance announced in the Autumn Statement towards the end of last year.

Chancellor Jeremy Hunt announced that the current allowance of £12,300 is being halved to £6,000 from April 2023 and then cut again to £3,000 from April 2024. That could mean an increased tax bill for many property owners planning to sell this year, but what can you do about it? We’ve taken some time to review the changes and here’s our summary of what’s happening.

What is Capital Gains Tax?

Gov.uk describes Capital Gains Tax as a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. So, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000).

An asset in this case could be, but isn’t limited to, things like personal possessions, a second home or shares that aren’t within an ISA. Therefore, those who own or are planning to sell a second home, will be required to pay Capital Gains Tax.

If you’re a higher rate taxpayer you’ll pay 28% on any gains from residential property. If you’re a basic rate taxpayer the rate changes depending on the size of the gain; you’ll pay 18% on residential property if it’s within the basic income tax band (£37,700 for the 2021 to 2022 tax year) or 28% if it’s higher.

The rules are different for trustees and businesses and you can find the full details on the gov.uk website.

What does it mean for me?

So how does this specifically affect property owners? Let’s look at an example.

If you own a property purchased for £200,000 and you sold it for £250,000, your ‘gain’ would be £50,000. That would mean your current taxable income for that property would be £37,700 (£50,000 minus £12,300 = £37,700) and you would currently pay £6,786 in CGT for a basic rate tax payer. However, in the next tax year your taxable income of the same property would be £44,000 taking your CGT tax bill to £7,920.

In summary, if you are looking to sell a property this year then it is advised to sell quickly and get the sale completed before the end of the current tax year at the end of March 2023.

Getting a quick sale by auction

With completion times on the open market taking up to six months and with the risk of fall throughs at any point, auction is the best method for securing a secure sale. By selling in an auction you get a legal binding contract on the fall of the hammer with a fixed completion set for only 30 days later. That means if you sell in February, you can hand over the keys and have the proceeds in your account before the end of March.

Auctions aren’t only limited to run down properties or those in need of repair, all types of property can sell by auction including vacant or tenanted residential properties, development land, mixed use units and commercial opportunities.

In a time of economic uncertainty, and with these tax changes hitting hard for those with multiple properties, now is a great time to get a great price with a sale by auction.

Selling with SDL Property Auctions

SDL Property Auctions is the UK’s most successful live-streamed auctioneer, selling hundreds of residential, commercial and development land lots every month for private individuals and corporate clients looking for a fast, hassle-free sale.

We offer several different ways in which our customers can buy and sell properties with us:

• Our Auction Events are broadcast online from our head office auction studio with a live auctioneer at the rostrum and are open to remote telephone, online and proxy bidding.

• We hold Timed Auctions on our website every day of the year, starting at a time suitable to the seller. With all lots open to bidding 24/7, buyers can click and immediately place their bids at a time to suit them.

Blending professional advice, traditional auction experience and modern technology, our team of auction experts recommend the best sales method to suit our clients and guarantee the maximum value for all properties, regardless of type.

Call our friendly team today to on 0800 046 5454 find out how we can help you sell by auction.