Tax implications when selling a house

gingercordial

Baxter100 wrote: »

Slight tangent, but why doesn't CGT factor in inflation?

It used to, and still does for capital gains for companies (technically corporation tax on chargeable gains). Those calculations use an RPI factor from the month of purchase and the month of sale; the inflation element deducted from the gain is called "indexation allowance".

Indexation allowance was abolished for people from 1998 (if I recall correctly) and replaced by taper relief, which reduced the gain pro-rata to the years held.

Eventually in April 2008 taper relief was also abolished, and replaced by CGT being charged at 18%/28% instead of the normal 20%/40% income tax rates. The idea is you lose the inflation element but instead benefit from a lower tax rate than before. It's supposed to be easier to understand.