What do I have to do if I’m selling an investment property?

Jun 21, 2024 | VAT

Selling an investment property can be daunting, especially for first-time sellers, so it’s important to know the steps involved to ensure a smooth transaction.

To help you out, we’ve put together this guide that should help you navigate the sale of your investment property. Let’s get to it.


Work out your property’s value

Working out the value of your properties is an essential first step when selling a property. Unfortunately, it’s a difficult process, and an array of valuation methods are available, including the sales comparison, income approach, and cost approach, each considering different aspects of the property’s worth.

No matter the approach you choose, the process will involve on-site inspections, data analysis, and the preparation of a detailed valuation report. But it’s worth it; an accurate valuation will set a competitive price to attract buyers while offering you as fair a deal as possible.

We highly recommend you speak with an estate agent or accountant to help you with this process. Working with experts like these will help you ensure optimal financial outcomes.


Ending a tenancy

Sometimes you want to sell a property you are currently letting, which can be complicated when you have tenants that have not reached the end of the tenancy agreement. If you want to sell the property, you are not entitled to evict the tenants if you have a fixed-term contract with them.

If you sell a property with tenants living in it, the new owner becomes the new landlord, and the tenancy continues as normal.


Calculate, report, and pay capital gains tax

When you sell your property, you will likely have to calculate, report and pay a capital gains tax (CGT) bill. CGT is the difference between your property’s selling price and the amount you paid.

In the UK, you pay higher rates of CGT on property than other assets:

Gains type                                        Basic rate                              Higher rate

Property (from 6 April 2024)               18%                                         24%

Other assets                                         10%                                        20%

All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free. As of the 2023/24 tax year, this allowance was £3,000. You’re not allowed to use any unused CGT allowance into the next tax year – it’s a “use it or lose it” type of situation.

You can deduct the amount you originally paid from your property from the sales price to work out your gain. You can also deduct certain expenses involved with the buying and selling of the property – things like broker fees, stamp duty land tax fees, and some improvements to the property that you made.

You must pay CGT within 60 days of the completion of the sale. You can do this by submitting a residential property return online. To claim your allowable expenses, you should add details of these to your self-assessment tax return.


Post-sale obligations

After a sale, you need to inform all relevant parties of the sale, including your property manager (if the property was rented), utility providers, and your local councils. You must also ensure that your outstanding bills are settled before the settlement date.

You should always keep all your documents related to the sale, including the contract of sale, settlement statements, and records of any expenses incurred even after the sale. These records are important for tax purposes and in case of any future disputes.


Get help

At Blue Shore, we simplify the post-sale process regarding investment properties. We know that complications can arise, so we’re on hand to help handle the issues while you can focus on building wealth and growing your business and portfolio.

Contact us for help with selling your investment properties.

Ready to go? We’re excited to hear from you.

Let’s get started, as soon as you’re ready. We’re always up for a chat about how we can support you and your business.

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