If you sell a property in the UK you might need to pay Capital Gains Tax (CGT) on any profits you make. This will not apply to profits made selling your main home, provided it has been occupied by you throughout your period of ownership, but it does apply if you’re selling a buy to let property or a second home.
Reporting requirements
For sales that complete on or after 27th October 2021, taxpayers are required to report and pay their estimated CGT liability within 60 days of completion. This is an increase from the 30-day deadline that was in force between 6th April 2020 and 26th October 2021.
Who is affected?
The 60-day reporting deadline applies to:
Individuals;
Trustees;
Personal representatives;
Partners in partnerships and limited liability partnerships; and
Joint owners of property.
There is no 60-day reporting requirement where no tax arises from the disposal. For example, where:
The disposal is a ‘no gain, no loss’ transfer between spouses or civil partners;
Any gain arising on the disposal will be fully covered by exemptions, for example the annual exemption or Private Residence Relief; or
The property is being sold at a loss or nil gain.
What do you need to do?
You can open a “Capital Gains Tax on UK Property” account with HMRC, though your online Government Gateway and report the disposal yourself or authorise your accountant to do it for you.
Once the 60-day return is submitted, HMRC will issue a payment reference, under which you can make payment on account of the estimated CGT arising from the disposal.
Deadlines
You have 60 days from the date of completion to report the property disposal and make the CGT payment on account to HMRC.
There may be penalties for late filing if you miss this deadline, and interest may be charged on any unpaid tax. In certain circumstances, a 60-day return may not be required, for example if you have already included the disposal on your self-assessment tax return.
Things to remember
If you’re considering selling or gifting a residential property, talk it over with your accountant to find out if there is a CGT liability and stay on top of the reporting requirements.
Collate all the information and let your accountant know your plans as soon as possible to minimise the risk of missing the deadline and allow enough time to plan your cashflow.
Where the disposal results in a loss, you don’t need to file a 60-day return, but it may be beneficial to file anyway to claim the loss with HMRC.
The reliefs available on residential properties changed in April 2020. Check with your accountant if you’re unsure.
Following the end of the tax year you should review your position to determine if tax was overpaid on your CGT payment on account.
If you have any questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.