Introduction

Calculating capital gains tax on the sale of a property can be complicated, but it is important to understand how it works. In this article, we will outline the steps to calculate capital gains tax.

Step 1: Determine the Sale Price and Purchase Price

The first step in calculating capital gains tax is to determine the sale price of the property and the original purchase price. The sale price is the amount that you sold the property for, and the purchase price is the amount that you paid for the property when you bought it.

Step 2: Calculate the Gain

The gain is the difference between the sale price and the purchase price. This is the amount that is subject to capital gains tax.

Step 3: Apply Exemptions and Allowances

After calculating the gain, you can apply any exemptions and allowances that are available to you. This includes the main residence exemption and the annual capital gain tax on sale of property allowance.

Step 4: Calculate the Tax

Once you have applied any exemptions and allowances, you can calculate the amount of capital gains tax owed. The tax is calculated at a rate of 28% for higher rate taxpayers and 18% for basic rate taxpayers.

Conclusion

Calculating capital gains tax on the sale of a property can be complex, but by following these steps and understanding exemptions and allowances, you can ensure that you are paying the correct amount of tax.