Understanding CGT, Inheritance Tax and Property Tax Rates

In this final article in our series about the marginal rate of tax and tax rates, we take a look at Capital Gains Tax, Inheritance Tax and tax in respect of property. You can read the rest of the articles in the series here:  What is the Marginal Rate of Tax 

Capital Gains Tax 

 If you sell an asset such as property, shares or even your business, you may be liable to capital gains tax (CGT) on any profit (gain) you make. After the deduction of an ‘annual exempt amount’, you will be taxed on gains at the following rates, based on whether you have any income tax basic rate band (see above) remaining, after all of your income has been taxed:

Tip: There is a specific exemption from CGT if you sell your only or main home. However, for other property disposals, tax payment and reporting obligations can arise just 60 days after your completion date, so make sure you take advice in good time.

Tip: As explained for income tax, selling your unwanted possessions will not usually create a capital gain. Your personal possessions are likely to be classed as ‘chattels’ for tax purposes. There are specific rules for calculating CGT on chattels. Some, such as private cars, are exempt from CGT altogether. For other non-exempt items, there will also be no CGT consequences if the sale proceeds are less than £6,000.

Also mirroring the income tax position, any capital gains made on the disposal of stocks or shares in an Individual Savings Account are exempt from CGT.

Companies are not liable to CGT; instead, they pay corporation tax on gains arising from the disposal of capital assets.

Inheritance Tax

Inheritance tax (IHT) is paid on the value of a deceased person’s estate (their property, money and possessions) that falls above the nil-rate band. The value of the deceased person's estate is computed after exempt gifts to their spouse or civil partner, or to a charity, are deducted.  As such, most estates in the UK are not liable to IHT.

The residence nil-rate band is available if a deceased person leaves their home to specified family members. It is reduced by £1 for every £2 that the estate value exceeds the £2 million threshold.

On rare occasions, IHT can also apply to gifts made by a person in their lifetime. It should also be noted that certain gifts a person makes in the 7 years leading up to their death can affect the IHT calculation.

Various IHT tax reliefs are available, including for business assets. Please contact us to talk about efficient wealth planning for your family.

Buying Property as an Individual – Stamp Duty Land Tax

If you buy land or buildings in the UK, you will pay stamp duty land tax in addition to the cost of the property. The rate of stamp duty land tax depends on a range of factors including where the property is situated and whether it is residential or non-residential. Reliefs exist for first-time buyers but there are higher rates for those buying properties when they already own another dwelling. The bands and rates applicable from 1 April 2025 are as follows:

For land and buildings in England and Northern Ireland (Stamp Duty Land Tax):

A surcharge applies if you buy an ‘additional’ residential property, meaning you own more than one. The surcharge applicable is 5%.

Tip: First-Time Buyer relief effects a 0% rate on the first £300,000 of residential property purchases, provided that conditions are met and the price is not over £500,000. 

Buying and Holding Property in a Company

Stamp Duty Land Tax

Companies (and other similar business structures) are also subject to Stamp Duty Land Tax on property purchases and, where residential property is concerned, the rates can be higher than those shown for individuals.

Annual Tax on Enveloped Dwellings

If a company (or other similar business structure) owns UK residential property that is valued at more than £500,000, the company may need to pay an Annual Tax on Enveloped Dwellings in addition to any Stamp Duty Land Tax at acquisition and its annual corporation tax bill. There are some reliefs and exemptions that may apply but this is a complex area.

Please speak to us about companies and property transactions, or any of the issues raised in this series of articles about tax rates. 

This summary only an overview of several key UK taxation rates, allowances and reliefs as applicable to persons resident and permanently settled in the UK. No action should be taken without consulting the detailed legislation or seeking professional advice.  Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.