How to avoid capital gains tax when selling investment property

How to avoid capital gains tax when selling investment property: Strategy #1 – Timing the sale right

Capital Gains Tax is calculated on an annual basis, and this is based on your tax year. Currently, there is a £6,000 annual CGT allowance that you can offset against any assets you dispose of that year.

Now, imagine you have two properties in your portfolio that you want to dispose of. Both have made small capital gains of £4,000 and £5,000 respectively.

If you sell both properties this tax year, you will have to pay CGT on £3,000 (£9,000 – £6,000 annual allowance). However, if you delayed selling one property until the next tax year, you would avoid CGT altogether because your £6,000 allowance would ‘reset’.

How to avoid capital gains tax when selling investment property: Strategy #2 – Keep it in the family

If you sell or transfer an investment property to your spouse, then you won’t be liable for CGT unless you were separated and didn’t live together at all during the tax year.

If your spouse sells the property on, they will have to pay CGT on any further increase in value.

Placing a property in trust is another way to defer CGT liability.

How to avoid capital gains tax when selling investment property: Strategy #3 – Offset losses

If you have made losses on other investments, during the current or previous tax years, you can offset these against your capital gains. If these losses exceed your capital gains, you won’t have to pay any CGT.

Special cases

This section is not about strategies on how to avoid capital gains tax when selling investment property, but special cases where your CGT will either be deferred or reduced.

Principal Private Residence Relief (PPR)

If you sell the property you live in as your main or only home, you will not normally have to pay CGT on any gains. However, if you buy a property specifically as an investment, this relief does not apply. So you shouldn’t try to use PPR as a CGT avoidance strategy in this way.

If you previously lived in the property you are selling, you may qualify for some relief for the period you lived there, plus the most recent nine months. The rules around this are complex, so you should clarify your specific situation with your tax adviser.

Incorporation of your property business

If you are a sole trader, or part of a partnership, you can defer CGT by setting up as a property business. Your gains are then converted into company shares, and you will only have to pay capital gains tax when (and if) you sell your business.

If you decide to follow this route, you will need to operate as a genuine business and not simply use the corporate structure as an investment vehicle.


Tax liabilities can never be generalised, and many factors will affect how much tax, including CGT, you will have to pay when selling an asset. Tax regulations, including allowances, also change regularly.

While we have taken care to ensure the above information was accurate at the time of writing, it should not be taken as tax advice. Consult with your accountant or a qualified tax adviser for information specific to your property portfolio.

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