In the UK, there are various important tax considerations to keep in mind when you decide it’s time to sell your property business.

Capital Gains Tax

Capital Gains Tax (CGT) applies to the profit made from selling your business, not the entire sale amount received.

When you want to sell your property portfolio, you need to carefully plan the sale to ensure you’re not overburdened by any taxes on the profits of your transaction.

Starting from the 2024/25 financial year, the CGT Annual Exempt Amount has decreased to a historic low of £3,000.

Current CGT rates are as follows:

  • 10 per cent(18 per cent for residential property) on the entire capital gain if your total annual income is below £50,270.
  • 20 per cent (24 per cent for residential property) the entire capital gain if your total annual income exceeds the £50,270 threshold.

Business Asset Disposal Relief (BADR), previously known as ‘Entrepreneurs Relief,’ offers a reduced CGT rate for eligible business disposals, providing significant savings on asset sales up to £1 million during your lifetime.

BADR is accessible to individuals involved in business who are disposing of qualifying business assets, such as selling an entire business or shares.

Under BADR, the CGT rate is reduced to 10 per cent, benefiting higher-rate taxpayers by halving the standard CGT rate of 20 per cent.

When disposing of property, CGT must be reported and paid within 60 days from the date of disposal.

What if your business is set up as a limited company?

Transferring your property portfolio into a corporate structure can provide substantial tax benefits, largely due to the differing tax treatments between limited companies and individual landlords.

If your business is structured as a limited company, you will be subject to Corporation Tax on profits derived from the sale of business assets rather than paying Income Tax or CGT.

You must calculate your gains to determine your tax liability and report these gains to HM Revenue and Customs (HMRC) when submitting your Company Tax Return.

The amount of tax payable will be influenced by any allowances and reliefs you are eligible to claim.

However, please remember that if you choose to incorporate your property portfolio into a limited company you will be bound by the Companies House rules and fees.

This includes completing an annual confirmation statement and providing details of people with significant control in the business.

These requirements can add additional administration to the management of your property investments.

You should also be aware that any properties already owned by you, that are transferred into a limited company structure could be subject to Stamp Duty Land Tax (SDLT).

If you are planning to sell your property business and want advice on your tax obligations, please get in touch.