Did you know that capital gains tax (CGT) is now due within 30 days of completing the sale of a UK residential property? This new rule came into force on 6 April 2020, but not a lot of people are aware of it, and a few have already missed the deadline!
Under the new regime, from 6th April 2020 you must report and pay CGT to HMRC within 30 days of completing the sale of a UK residential property (such as a house or flat). This rule applies only if CGT is payable on the gain (if any) from the sale.
The CGT rate is 18% for basic rate income taxpayers, or 28% for higher rate income taxpayers. Any CGT paid is treated as a payment on account of the fiscal year’s total CGT liability.
Example:
So, say that Dom a basic rate taxpayer, exchanged to sell his rental flat on 1 May 2020. He completed the sale on 30 May 2020, and the gain was £70,000. Within 30 days of completion, ie by 30 June 2020, he should have both (i) reported the gain to HMRC (ie filed a new CGT return electronically) and (ii) paid the CGT due (at a rate of 18%).
Essentially, you must report and pay any CGT due on a gain from a sale of a property within 30 days of completion.
The new rule applies to anybody selling a UK residential property (mainly individuals, but also trustees or personal representatives) where there is a gain on which CGT is due.
For example, the new regime is relevant to someone who sells a flat they have been renting out, a second home, or their house. There are, however, a few exemptions…
The rules of the CGT reporting and payment regime do not apply:
- If there is no CGT payable on the gain of the sale
- If the sale of a property is covered by the principle private residence (PPR) exemption
- If the gain is covered by the CGT exemption of £12,300. This annual CGT exemption is set against the first chargeable residential property disposal in the fiscal year
- To companies or commercial property
- To overseas properties
Landlords:
It’s important to note that if you are a landlord and rent out a lot of properties, you will have to report and pay the CGT for each property separately.
So, if you sell eight rental flats in the year, you must file eight individual CGT returns, adhering to the 30-day deadline for each sale. Yes, you would have eight different reporting and payment deadlines!
How to report:
If you are liable to report and pay CGT on a residential property:
- You must set up a “capital gains tax on UK property account” with HMRC. (You can authorise us to manage your account for you)
- We can then prepare a new CGT return from the account, and notify HMRC of the gain, within 30 days of completion on the property
- You must then pay the CGT within the same 30 days
For more information and to discuss your requirements please do not hesitate to contact us via one of the options on the ‘contact’ tab.