Do you pay capital gains tax on remortgage?
20/03/2023
(Last Updated: 08/12/2023)
2,279
3 min read
A remortgage on its own does not trigger a need to pay capital gains tax. You would need to declare and pay Capital Gains Tax if the remortgage was linked to a disposal of part of the beneficial interest that, at some point during your ownership, wasn't your Principle Private Residence. Some examples where if you remortgage you do pay capital gains tax:
When would you pay Capital Gains Tax on a Remortgage? | When wouldn't you pay Capital Gains Tax on a Remortgage? |
|
|
Is the capital gains tax paid on the equity released?
No, it isn't. You pay capital gains tax on the net gain on disposal of the assets, or part disposal. For example, if you buy a property for £100,000 with a £75,000 mortgage, if the property increased in 5 years to £200,000, you could remortgage to take out the additional £75,000 equity. You don't pay CGT at this point. If in a further 5 years the property increased to £300,000 and you sell, then the calculation is £300,000 less the original £100,000, less cost of purchase and sale, less your CGT allowance - then you pay the CGT on the net gain.Need tax advice on your property transaction?
- Get up-to-date property tax advice on SDLT, CGT, IHT, Personal versus partnership versus company structures
- Free 15-minute initial consultation with a qualified accountant from our panel of tax advisors
- Ask your tax questions and get guidance on what you can do next
- If there is some further accountancy work required, then you'll be quoted for this as a separate piece of work with no obligation to purchase
What if I gift the property to someone else?
Where you gift the property to a connected party to you, then you pay CGT on the market value of the property, regardless of what you gave it away for. Read more - What is the Capital Gains Tax on Gifted Property?What are the current rates for Capital Gains Tax?
The Capital Gains Tax on residential sale profit is as follows:
| Tax Band | Income Tax Band | Capital Gains Tax Rate (chargeable on profits) |
| Basic rate income tax payer | £0 to £50,270 | 18% |
| Higher rate income tax payer | Over £50,271 | 24% (post 6th March 2024 budget) |
Non-UK Residents pay a flat rate of 28% for any gain.
You have a tax free allowance of £3,000 for 2023-24.
Source: HMRC - Capital Gains Tax Rates
Frequently Asked Questions
REINVEST
WIFE
Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.
