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Looking to sell a property? Don’t get caught in a tax trap, warns TWP

Every year thousands of people sell second homes and investment properties without realising that they could owe a considerable amount of tax on their sale.

That is why TWP Accounting, based in Weybridge and Cranleigh, is calling on landlords and second homeowners to consider and better understand the implications of disposing of property.

While most regular homeowners won’t face Capital Gains Tax (CGT) on the sale of their main property thanks to Private Residence Relief. Those selling holiday homes, second homes or rented accommodation will face a tax charge of up to 28 per cent on the gains they have made on the property.

For example, a higher-rate taxpayer who buys a home for £400,000 and then sells it for £500,000 will have to pay CGT on the £100,000 profit they have made at a rate of 28 per cent – a total tax bill of £28,000.

What’s more, TWP says, they will need to report this gain and pay the tax due within 60 days of the property sale completion!

This rule on the sale of second homes even applies to properties that have been inherited following the death of a loved one.

Andrew Goddon, Partner and Head of Taxation at TWP, said: “Having to sell a property can be a very stressful event, but add to that the prospect of settling a large tax bill and it can complicate a transaction and bite into the gains made during the sale.

“It is important that property sellers, particularly landlords and investors, understand the tax implications of their property transactions and take steps to minimise the liabilities they face.

“There is a range of tax planning opportunities to consider, including potentially incorporating their portfolio into a limited company structure, but this needs careful assessment and expert advice.”

Andrew is calling on those considering or already completing the sale of a second home or investment property to seek advice in advance to make sure they report and pay the right amount of tax on time.

To find out more about TWP’s property tax services, please contact us.