When disposing of a property, Capital Gains Tax may apply if you sell, gift, or transfer it to someone other than your spouse or civil partner in the UK.
If you’re a UK resident and there’s a Capital Gains Tax liability, you must report it and make the payment within 60 days of completing the sale. You can accomplish this through HMRC’s digital UK Property Service.
If necessary, you’ll also need to include the sale in your Self-assessment tax return.
For a one-time property disposal, you might not need to register for self-assessment or submit a tax return. You can report and pay Capital Gains Tax through the new service.
However, if there’s no tax to pay due to a loss, annual exemption allowance, or other relief covering the gain, then no report is required.
For non-residents, regardless of whether the property is residential or not, the disposal of a property requires reporting to HMRC within 60 days of the sale’s completion. This reporting deadline applies to all disposals, irrespective of whether there is a tax liability or not, unlike the rules for UK residents.
Here’s how to go about reporting:
Registration: Individuals planning to report the disposal themselves, without using an agent, must register for the new digital service.
Agent Involvement: If individuals prefer to engage an agent to handle the reporting, they must establish a Capital Gains Tax account with HMRC and provide their agents with a CGT reference.
Regarding dates:
Disposal Date: The date when property sale contracts are exchanged is considered the date of disposal not the completion date if this is later. This date determines the tax year in which the gain is recognized.
Completion Date: Typically, the completion date is when the proceeds are received, and the keys are handed over to the new owner. This date initiates the 60-day reporting and Capital Gains Tax payment period.
Penalties for Non-Compliance:
Failure to submit the report or pay the tax within the 60-day period will result in penalties and interest, similar to those in the self-assessment process. Initially, there is an automatic £100 late filing penalty, followed by additional penalties imposed after 6 months and 12 months for non-filing. Interest will also accrue on late tax payments.
Using Estimated Figures:
In cases where exact figures are unavailable at the time of reporting to HMRC, estimated figures can be used rather than delaying the report beyond the 60-day limit. Individuals have a 12-month window to amend their return with actual figures when they become available. Alternatively, they may choose to adjust the figures on their self-assessment return if it’s required.
Multiple Disposals:
If multiple property disposals occur within the same tax year, a separate return must be submitted for each property unless both the exchange of contracts and completion take place on the same date. Losses incurred from a previous disposal can be factored into the Capital Gains Tax calculation as long as they were reported to HMRC.
In cases where a gain was realized on an earlier disposal, and Capital Gains Tax was paid to HMRC within 60 days, individuals can claim a repayment through the new service if a subsequent disposal results in a loss or if their expected income for the tax year significantly decreases, leading to a higher rate of tax initially applied in the calculation.
Frequently Asked Questions (FAQs):
Q1: How can individual customers access the new CGT service?
A1: Individual customers can access the new CGT service by registering and subscribing to it through Gov.UK.
Q2: Can agents access the new CGT service on behalf of clients?
A2: Yes, agents must be registered with the existing HMRC Agent Service and establish an Agent-Client relationship. Clients can electronically authorize their agents to act on their behalf.
Q3: How and when should I pay the CGT charge?
A3: You must report the disposal and make any CGT payments within 60 days of completing the disposal. Reporting and payment are done electronically through the new online CGT Payment on Property Disposal system. Further details are available on gov.uk. For individuals without digital access, offline reporting options will also be provided.
Q4: Will I face penalties for late filing of CGT Payment on Property Disposal returns?
A4: Yes, late filing penalties for CGT Payment on Property Disposal returns are similar to Self Assessment penalties under Schedule 55 of the Finance Act 2009. However, daily penalties do not apply. Filing must be done within 60 days of sale completion. A late filing penalty of £100 applies if filed more than 60 days after completion. Returns filed over 6 months late will incur a penalty of £300 or 5% of the outstanding tax, whichever is higher. Returns filed more than 12 months late face the same penalty.
Q5: Do I need to report to HMRC if the gain is below the personal allowance?
A5: If the gain falls below the annual exempt amount or is covered by Private Residence Relief (for UK residents), there is no obligation to report the disposal. However, non-residents must report the gain even if it’s below the annual exemption.
Q6: Do these rules apply if an individual becomes non-resident during the tax year?
A6: Yes, non-residents must report the disposal of UK residential property interests within 60 days of completion and pay any capital gains tax due.
Q7: How long does it take to register for the new Digital service if I’m not in Self Assessment?
A7: Registration can be completed in minutes.
Q8: Is a Unique Taxpayer Reference (UTR) required for all clients to submit a CGT on UK Property Return?
A8: A UTR is one of several identifiers that can be used to report and pay CGT.
Q9: Do these rules apply to gifts?
A9: Yes, the rules apply to gifts of UK residential property.
Q10: Do they cover the disposal of non-UK residential property by a UK resident?
A10: No, these rules only apply to UK residential property interests. Disposal of non-UK property with a capital gain must be declared via Self Assessment.
Q11: Will I receive a reference for payment?
A11: Yes, customers will receive a payment reference number after submitting their CGT Return.
Q12: Is CGT Liability paid in the same way as Self Assessment through a UTR?
A12: No, customers must use a payment reference number provided after submitting their CGT Return. The CGT reference is separate from the UTR.
Q13: How do I obtain a CGT reference?
A13: Register for a CGT account via Gov.UK.
Q14: What if I don’t have an online bank account?
A14: Various payment methods are available, including non-electronic options.
Q15: Will the CGT paid on account appear on my Self Assessment account?
A15: Self-Assessment online will be updated to include reference to CGT payment on account.
Q16: How do these rules affect disposals involving a property with a let annexe or flat?
A16: Such disposals must be reported within 60 days of conveyance completion.
Q17: Can I partially complete a declaration and return to it later?
A17: Yes, a save and retrieve feature will allow taxpayers to return to a partially completed Return that hasn’t been submitted yet.
Q18: What if I don’t have final figures ready within the 60-day deadline?
A18: Don’t delay reporting. Use estimated figures to meet the 60-day deadline and amend when final figures are available, either through the digital service or on your Self Assessment form if required.
Q19: Can the annual exempt amount be used against a residential property gain if other disposals are expected during the tax year?
A19: The annual exempt amount applies to the residential property gain, ignoring later disposals with a different completion date.
Q20: Do these rules cover land disposals as well as residential property?
A20: These rules apply to direct disposals of UK land with a residential property gain for UK residents. Non-residents must report all land and building disposals within 60 days.
Q21: How do Trusts access the new CGT service?
A21: Trustees register and subscribe to the service using the Trust UTR number. If not yet registered, trustees must register the Trust with the Trust Registration Service and use a Temporary Reference Number while awaiting the Trust UTR number.
Q22: Do these rules apply to periods of administration in deceased estates?
A22: Yes, the rules apply to personal representatives.
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© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S S Thandi and M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.