Capital gains tax on property explained

Are you planning to sell your home, other assets or a second property? You may need to think about the implications of capital gains tax (CGT). Read on to find out more about capital gains tax in Ireland and how much you might have to pay.

Capital gains tax is a tax that must be paid on any profits you make when you sell an asset, such as property, that has increased in value. CGT is only due on the profit you make, not on the full amount you sell your asset for.

For example, if you purchase an antique vase for €10,000 and later sell it for €30,000, you’ve earned €20,000. This €20,000 is the taxable amount, subject to some deductions (more on that below).

Applying only to profits made, capital gains tax is subject to an annual tax-free allowance of €1,270 in the tax year. Married couples and civil partners who jointly share an asset can combine their allowances, but it is not transferable.

Property you sell in Ireland may incur capital tax gains on profits made. However, if the property you’re selling is your main home, you may be exempt from CGT due to principal private residence (PPR) relief. However, any other property or a second home that you sell is subject to capital gains tax.

For the purposes of CGT, a property is classed as your main residence if the following apply:

• You’ve lived in it as your main home for all the time you’ve owned it.
• You have used the entire property as your home. For example, you haven’t let any part of it out or used part of it for business purposes.

If these points apply, you may qualify for principal private residence relief. This means you will not have to pay CGT when you sell the property. However, if they don’t apply, you may have to pay some tax.

It’s also important to note that there are restrictions on your claim if you’ve used any part of your property for something other than your home. For example, if you used 75% of it as your home, and 25% for your business. In this case, you would only be able to claim for 75% relief – the percentage of your property that you’ve used as your main residence.

You can find out if you’re eligible for principal private residence relief here.

Once you’ve exceeded your annual tax-free amount, you’ll have to pay capital gains tax. When selling property, the standard CGT rate in Ireland is 33% as of 2024.

The CGT allowance is the amount you can earn in profit, tax-free. In 2024, the first €1,270 of your gain or gains (after deducting losses) are exempt from CGT, and you are entitled to this exemption whether you are resident or non-resident. You cannot transfer this exemption to your spouse or civil partner.

Calculating capital gains tax when selling a property will depend on your gains.

Capital gains are typically taxed at 33%, but other types of gains have different rates. For example, you can expect to pay the following:

• 40% for gains from foreign life policies and investments
• 15% for gains from venture capital funds (individuals or partners)
• 12.5% for gains from venture capital funds (companies)
• 80% for some windfall gains

Capital gains tax on agricultural land in Ireland is also taxed at 33%, but this can be reduced if you qualify for certain stamp duty reliefs, such as consanguinity relief and farm consolidation relief.

You can also deduct certain other costs from your gain when calculating CGT on property. These are called ‘allowable expenses’ and include estate agent and solicitors fees, as well as the cost of any renovations, for example an extension, or money you have spent that has added value to the property.

If you owned the asset that you are selling before 2003, you might be able to claim indexation relief, otherwise known as inflation relief. So, how do you calculate the indexation of CGT?

Check the CGT indexation table, and multiply the cost by the indexation factor for the year you incurred the cost. You can deduct this indexed cost as an allowable expense from your capital gain, and then use your indexed cost or costs when you calculate your CGT and file your return.

If you’ve owned the property for more than seven years, you can also get partial relief.

To find out what you’re entitled to, divide seven by the number of years you have owned the property. This will give you the proportion of the gain that is exempt. For example, if you owned the land or buildings for ten years, the gain will be reduced by seven-tenths (7/10).

In Ireland, the tax year falls into two periods – the initial period which runs from 1st January to 30th November, and the later period which runs from 1st December to 31st December.

You can pay your capital gains tax online in Ireland. You can do this via the Revenue or myAccount. In order to make your payment, you must be registered for CGT Ireland. You can register here with your tax registration number.

To make a CGT return, complete the CGT section of the Income Tax Return (Form 11). If you don’t need to make an income tax return, you can complete Form CG1.

People who own two homes could consider which is worth the most money, and register that home as their main address for CGT purposes. However, the rules on doing this are stringent, and it’s best to consult a financial adviser before doing anything.

There is no CGT payable on death, but the value of the home will be included in the estate. This means that inheritance tax may be payable instead.

If you inherit a property and sell it without making it your home, you may have to pay CGT. The amount you have to pay is based on the increase in value between the time of death and the date of sale.

With careful planning, it may be possible to reduce your capital gains tax liability. Here are some strategies to consider, but it’s important to consult an accountant or financial adviser before taking action.

1. Consider joint ownership with your spouse – Remember, everyone has their own CGT allowance. If you jointly own a property with your spouse, you can effectively double your tax-free allowance.
2. Time the sale carefully – If you’ve used up your annual CGT allowance, you could consider postponing the sale of your property and use your next year’s allowance.
3. Nominate the property as your main residence – If you own multiple homes, you should think carefully about which one you register as your main residence. The rules on this are very strict, however, so speak to your adviser to determine the best approach.
4. Deduct eligible costs – Make sure you deduct allowable expenses from your gain, for example, buying and selling costs, to mitigate your CGT liability.

Capital gains tax on Irish property is complicated, so it’s always best to consult an expert for advice tailored to your situation.

Budget 2025 proposes to retain the upper age limit of 70 in the context of retirement relief, while CGT relief for angel investors is being enhanced by increasing the lifetime limit on gains to which relief applies from €3 million to €10 million.

The EII scheme, start-up relief for entrepreneurs and the start-up capital incentive schemes will be extended until the end of 2026.

If you’ve just sold an asset and paid capital gains tax, you might want to consider investing the money you’ve earned as profit into a lump sum savings account.

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