Home Front logoQ. I own a buy to let property with a friend of mine as tenants in common; we also both own a home too. Having had the property for almost 10 years now we are tossing around the idea of maybe selling since the property market has had such an uplift recently but now the question of Capital Gains Tax has come up. Neither of us is really sure what our liability is, can you advise?

A. You usually don’t have to pay Capital Gains Tax when you sell or dispose of your own home. But you may have to pay Capital Gains Tax when you sell or dispose of a piece of land or a property that’s not your main home. Capital Gains Tax is a tax on the gain you make when you sell or otherwise ‘dispose of’ an asset. You usually dispose of an asset when you no longer own it. For example if you, sell it, give it away, transfer it to someone else, or exchange it for something else. So too if you make a gift of a property to your children, you have to work out if there’s any Capital Gains Tax to pay on the disposal of the property at that time. When you sell or dispose of property – such as a building, land or a lease – you have to work out if you have any Capital Gains Tax to pay. Typical types of property you might pay Capital Gains Tax on include:

A property that you’ve bought as an investment, for example a buy-to-let property as in your case
A second home, for example a holiday home in the UK or overseas
Business premises, such as a shop or a factory
Land, such as agricultural land

If your property counts as a business asset there are other reliefs which may be available. There are some Capital Gains Tax reliefs on property that’s not your main home. In straightforward cases you need to look  at  the asset disposed of that’s liable to Capital Gains Tax and work out the gain, then deduct your tax-free allowance (known as the Annual Exempt Amount) this is currently £10,600 for 2012-2013, work out the tax due on the gains that remain. The amount of Capital Gains Tax you are liable for is between 18% and 28% (the tax rate you use depends on the total amount of your taxable income). For more information talk to a qualified tax accountant or go to www.hmrc.gov.uk