How much tax do you pay if you sell a commercial property?
Commercial property (also known as commercial real estate), can be referred to as property used to generate profit, either from capital gain or rental income. This includes office buildings, industrial property, hotels, shopping centres, farming land and warehouses.
If you are the owner of such a property and you feel like the time has come for you to part ways and start afresh, there are many things for you to consider before selling. At the top of the list will be getting your head around how much tax you will have to pay when the property sells.
In accordance with the UK government, commercial property owners have to pay ‘Capital Gains Tax’ if they make a profit (‘gain’) when selling or disposing of property that is not their home. For example:
- Buy-to-let properties
- Business premises
- Inherited property
Having to pay the tax, or how much tax you have to pay, is subject to a number of factors. The following are just some conditions which may apply to your situation.
- Commercial property owners do not usually have to pay capital gains tax on gifts to a husband, wife, civil partner or charity.
- Tax relief may be possible if the property is a business asset.
- If the property was occupied by a dependent relative, the seller may be exempt from paying capital gains tax on their profit.
So, how much from the profit I receive from my sale will I have to pay in capital gains tax?
Capital Gains Tax is paid on the profit when you sell something that has increased in value.
You will therefore only be taxed on the ‘gain’ you have made, not the whole amount you have received.
For example, if you bought a commercial property for £20,000 and sold it at a later date for £30,000, you will only be charged Capital Gains Tax on the £10,000 difference.
Individuals who are UK residents are taxed at 10% or 20% on their gains, depending on their tax threshold.
Companies who sell or dispose of commercial property are subject to Corporation Tax on their profits.
Non-UK residents selling commercial property in this country have never been subject to such a tax. However, as of April 2019, all disposals of UK property by non-residents are now subject to Capital Gains Tax.
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