If you’re thinking of selling your property, or have already sold it you need to be aware of any capital gains tax that might be due.
There are now two parts to the preparation and disclosure of capital gains tax on the sale of a property.
- The sale must be reported to HMRC within 60 days of the sale.
- Any CGT must also be paid to HMRC within 60 days.
In addition to the above you will also need to declare the sale on your annual tax return.
Her are some key points to bear in mind as to how you do the above:-
1.Reporting and Payment Deadlines: When you dispose of a property, you must report any CGT liability and pay any tax due within 60 days of the completion of the sale. This applies to both UK residents and non-residents.
2. Reporting Method: The report and payment must be made using HMRC’s digital UK Property Service. UK residents can use this service for a “one-off” disposal, and there may be no need to register for Self Assessment or submit a tax return in this case.
3. Non-Residents: Non-residents must report all property disposals, whether residential or not, within 60 days, regardless of whether there is tax to pay.
4. How to Access the Service: Individuals can register for the digital service via Gov.UK. Agents can access the service on behalf of clients by creating an Agent-Client relationship.
5. Disposal and Completion Dates: The date of disposal is when contracts are exchanged, and the completion date is when the proceeds are received and keys handed over to the new owner. These dates determine the tax year in which the gain occurs. It is the date of exchange which is the relevant date for deciding the tax date point.
6. Penalties: Late filing and payment penalties apply if the report is not made or tax is not paid within the 60-day period. Penalties are similar to those for Self Assessment, including a £100 automatic late filing penalty, further penalties after 6 and 12 months, and interest on late payments.
7. Multiple Disposals: Separate returns are required for each property if multiple disposals occur within the same tax year, unless exchange of contracts and completion happen on the same date.
8. Annual Exemption: If the gain is below the annual exempt amount or covered by certain reliefs, there may be no obligation to report the disposal, but this can vary for UK residents and non-residents.
9. Gifts: The rules also apply to gifts of UK residential property.
10. Non-UK Property: These rules specifically apply to the disposal of UK residential property interests. Disposal of non-UK property with capital gains must be declared via Self Assessment.
11. Payment Reference: Customers will be given a payment reference number once they have submitted their CGT Return. This reference is separate from the Unique Taxpayer Reference (UTR).
12. Trusts and Deceased Estates: Trusts can access the new CGT service using the Trust UTR number. These rules also apply to periods of administration in deceased estates.
If you have any specific questions or need further assistance related to Capital Gains Tax and property disposals in the UK, please get in touch.
Frequently asked questions
Q: How do individual customers access the new CGT service?
A: Individuals register and subscribe to the service via Gov.UK.
Q: Are you, as my Agents, able to access the new CGT service on my behalf?
A: Yes, an Agent must be registered with the existing HMRC Agent Service and create an Agent-Client relationship. The client can electronically authorise the Agent to act on their behalf.
Q: How, and by when, do I pay the CGT charge?
A: You will need to report the disposal and pay any CGT due within 60 days of the completion of the disposal. Reporting and payment will be made electronically. Customers will report using the new online CGT Payment on Property Disposal system. Further information is available on gov.uk. For digitally excluded customers offline reporting will be possible. Further information on offline reporting will also follow in due course.
Q: Will I incur a late filing penalty if I file my CGT Payment on Property Disposal return late?
A: Yes, the penalties for CGT Payment on Property Disposal returns are calculated in the same way as Self Assessment under Schedule 55 of the Finance Act 2009, apart from daily penalties (which aren’t charged for CGT Payment on Property Disposal returns). The filing deadline for a CGT Payment on Property Disposal return is within 60 days of the completion of the sale. If a return is filed more than 60 days following the completion of the sale it is late and attracts a late filing penalty of £100. Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months after the completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.
Q: If the gain is calculated as being below the individual personal allowance, do I still have an obligation to report to HMRC?
A: If the gain is below the annual exempt amount or is covered by Private Residence Relief, there is no obligation to report the disposal if you are resident in the UK. If you are non-resident then you still have to report the gain even if it is below the annual exemption.
Q: If someone wasn’t non-resident at time of sale but became non-resident during the tax year do these rules apply?
A: Non-residents must also report the disposal of UK residential property interests within 60 days of the date of completion of the disposal and pay any capital gains tax that is due.
Q: If an individual is not in Self Assessment and sells a property, how long does it take to register for the new Digital service?
A: Registration can be completed in minutes.
Q: Do all clients need a UTR in order to submit a CGT on UK Property Return?
A: A UTR is one of several identifiers that can be used to report and pay CGT.
Q: Do the new rules apply to gifts?
A: Yes, the new rules apply to gifts of UK residential property.
Q: I thought the law would also cover the disposal of non-UK residential property by a UK resident?
A: No, the new rules only cover the disposal of UK residential property interests. The disposal of a non-UK property that gives rise to a capital gain for the individual, will need to be declared via Self Assessment.
Q: Will I be given a reference to make the payment under?
A: Yes, customers will be given a payment reference number once they have submitted their CGT Return.
Q: Will the CGT Liability be paid in the same way as Self Assessment through a UTR?
A: Customers will be required to pay using a payment reference number once they have submitted their CGT Return. The CGT reference is separate to the UTR.
Q: How do you obtain a CGT reference?
A: By registering for a CGT account via Gov.UK.
Q: What happens if someone doesn’t have an online bank account?
A: There are several ways for customers to make payment, including through non electronic means.
Q: Will the CGT paid on account show on my Self Assessment account?
A: The Self-Assessment online should be updated to include reference to CGT payment on account.
Q: How does this affect disposals of a whole property where part of it has been let i.e. annexe or flat within the main residence?
A: The disposal will need to be reported within 60 days of the completion of the conveyance.
Q: Can you partially complete a declaration and return to it a day or two later with the final information?
A: Yes, save and retrieve functionality will be available to allow taxpayers to return to a part completed Return that has not yet been submitted to HMRC.
Q: What should I do if I do not have the final figures ready to make the report within the 60 day deadline?
A: Do not delay in making your report. You can use estimated figures to ensure you report within 60 days and then amend the figures when you have final figures available. The amendment can either be done via the new digital service or on your Self Assessment form, if you are required to submit one.
Q: Can you use the annual exempt amount against a residential property gain even if you know you will make other disposals to be reported on the tax return during the tax year?
A: The calculation of the amount of tax notionally chargeable ignores disposals which have a later completion date. In this case the annual exempt amount would have to be used against the residential property gain – ignoring the later disposal.
Q: Are the rules to do with the disposal of land as well as residential property?
A: For UK residents these rules are for direct disposals of UK land on which a residential property gain accrues. If the disposal is of land that is not classed as residential property, then these rules do not apply and any gain will need to be declared via Self Assessment (the definition of residential property is at Schedule B1 Taxation of Chargeable Gains Act 1992). For non UK residents, all disposals of land and buildings must be reported within 60 days of completion.
Q: How do Trusts access the new CGT service?
A: A Trustee will register and subscribe to the service using the Trust UTR no. If the Trust is not yet registered, the Trustee must register the Trust with the TRS (Trust Registration Service) and use a Temporary Reference Number, which will be provided once registration complete to register and subscribe to the CGT PPD service whilst they wait for the Trust UTR no.
Q: Do these new rules apply to periods of administration in deceased estates?
Let‘s talk Capital Gains tax
If you have questions or concerns about tax, or in need of support with your tax return, give us a call or send us an email. Our team of tax experts will be happy to find out more about your situation and start thinking about how we might be able to get your tax bill down.