One of the significant tax every property owner must pay is the capital gains tax. Let's start with understanding what a capital gain is. In simple terms, a capital gain means the selling price less the acquisition costs.
For example, if you bought a property for £100,000 in 2001 and its market value now is £250,000, you made a capital gain of £150,000. If you sell this property for £250,000, you must pay the capital gains tax on your gain of £150,000. The capital gains tax is a critical consideration for property investors because most property investments will be eventually sold, and there will be a tax to pay on the gains.
UK Government collects more than £7 billion in revenue from capital gains tax every year!
Despite being such an important source of revenue, its history is not that long. Harold Wilson's Government first introduced the Capital Gains Tax (CGT) in 1965 on capital gains made on the disposal of assets by individuals, trusts and personal representatives of deceased persons. The lucky investors prior to that didn't have to pay any capital gains tax!