do you pay capital gains tax on remortgage
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Do you pay capital gains tax on remortgage?

20/03/2023
(Last Updated: 08/12/2023)
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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?
  • Remortgaging your Principle Private Residence.
  • Remortgaging your buy to let where you are disposing an interest, to someone who isn't your spouse, such as a company, friend or unmarried partner (known as a transfer of equity).
  • Remortgaging your Principle Private Residence.
  • Remortgaging your Principle Private Residence and adding someone to the title so you share the beneficial interest.
  • Remortgaging your buy to let where you aren't disposing of any interest in the property to someone who is your spouse.


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.

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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.
 

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Andrew Boast of Sam Conveyancing
Written by:
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.
Caragh Bailey, Digital Marketing Manager
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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.


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