Taxes on selling a house

1. What taxes do you need to pay when selling your house?
2. Capital Gains Tax
3. Inheritance Tax
4. How much tax do you need to pay when selling your house?
5. Taxes on selling your house: FAQs
6. Thinking about selling your house?

What taxes do you need to pay when selling your house?

There's lots to think about when you decide to sell your property. In the UK, there are some taxes you might need to pay. But which do and don’t apply to you will depend on whether or not you’re selling your main residence (the home you live in).

Option 1: The house you’re selling is your main residence

Option 2: The house you’re selling is not your main residence

In this scenario, you’ll probably need to pay CGT. And if you inherited the property, you’ll have to consider Inheritance Tax, too.

Capital Gains Tax

If you’re selling a house that’s not your main residence - such as a second home or a buy-to-let property - you’ll need to pay Capital Gains Tax on any profit you make from the sale. 

When you sell your main residence, you usually get Private Residence Relief, so you won’t have to pay this tax. The exceptions to this rule are:

• you haven’t lived in the house the entire time you’ve owned it

• you’ve rented part or all of the house out (excluding lodgers)

• you’ve used part of the house exclusively for business purposes

• the total grounds of the house are more than 5,000 square metres

If any of the above is true, you may have to pay some CGT. The Capital Gains Tax allowance for 2022/23 is £12,300. This means you can make £12,300 in capital gains (i.e. a profit on a property sale) before paying CGT. You can find out more about Capital Gains Tax. 

Inheritance Tax

If you’ve inherited a house, whether or not you decide to sell it, you'll need to pay Inheritance Tax. This is currently charged at 40% for properties valued at over £325,000. Inheritance Tax is due six months after the person’s death. Many people sell the house they’ve inherited to help pay this tax. 

Remember, if you sell your house to pay the Inheritance Tax, you’ll also need to pay CGT on any profit you make from the sale. 

How much tax do you need to pay when selling your house?

If you need to pay tax on the sale of your house, you can work out how much you owe based on the difference between the price you paid for it (if relevant) and the sale price to give you your profit. Then, deduct the relevant taxes.  

How to calculate tax on your house sale

To work out how much Inheritance Tax you need to pay, take the property value (over £325,000), divide it by 100 and multiply it by 40 to give you 40%. 

For example, say you inherit a property worth £400,000. The taxable value is £75,000 (£400,000 minus £325,000). £75,000 divided by 100 is £750, multiplied by 40 gives you £30,000. So your Inheritance Tax bill is £30,000. 

When do you pay taxes on selling your house?

You must report and pay Capital Gains Tax on most UK property sales within 60 days. Inheritance Tax is due six months after the person’s death. 

Taxes on selling your house: FAQS

Do you have to pay tax when selling your house?

Probably not if it’s your main residence. But if the property you're selling is a second home, has been rented out, or used for business, you might need to pay Capital Gains Tax on the profit you make from the sale. 

Is it possible to reduce how much tax you pay?

You can reduce your Capital Gains Tax bill by sharing ownership of the house with your spouse, timing the sale right and deducting all relevant costs from your profit. Avoiding Inheritance Tax is tricky - the best way to ensure others don’t have to pay it for a property they inherit from you is estate planning. Speak to an independent financial adviser to find out more. 

Do you have to tell HMRC when you sell your house?

If you need to pay Capital Gains Tax, you’ll need to let HMRC know and pay within 60 days of the sale. If you need to pay Inheritance Tax, HMRC will contact you. 

Do you need to pay Income Tax when selling your house?

No. If you decide to rent your property, you will pay income tax on any profit you make. This might be a factor to consider when deciding whether to sell a house or rent it out. If you sell, money from that sale doesn’t count as income in the traditional sense, so you don’t need to pay income tax. 

Do you need to pay Stamp Duty Land Tax when selling your house?

No. You only pay Stamp Duty Land Tax (SDLT) when you buy a house. How much you pay (if anything) depends on the house's value and the property type. If you’re buying and selling at the same time, your SDLT can be deducted from your taxable gain from your house sale, which can reduce how much tax you pay. Use our stamp duty calculator if you are planning to buy a property.

Thinking about selling your house?

Purplebricks is proud to be the UK’s leading estate agent. Our property expertise makes us the perfect partner to sell your house. We know the last thing you need when you come to sell is another unknown cost. 

From our dedicated local experts to our property support team, we’re on hand to help seven days a week. Want to find out how much is your house worth? Book a free house valuation or sell your home today.