Those selling or disposing of residential property in the UK should be aware of the 60-day deadline for reporting and paying Capital Gains Tax (CGT) to HMRC. Failure to do so will result in penalties.
Who qualifies?
UK residents have Private Residence Relief (PRR), so no tax to pay, if they sell a property that is their home.
However, there may be tax to pay for those who have an interest in property other than their main residence. The 60-day CGT reporting rules are not exclusive to individuals and could also apply to: –
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- trustees;
- executors and personal representatives;
- partners in partnerships and limited liability partnerships; and
- joint owners of property.
Calculating CGT
To calculate the gain arising on a property, deduct the original purchase cost of the property from the proceeds of the sale. Related fees like Stamp Duty Land Tax, solicitor’s fees and estate agent’s fees can also be deducted. Our experts can also advise on other allowable costs and reliefs available.
The rate of CGT depends on your level of income, but for residential properties the rates are 18% and 28%.
After the calculation, the gain needs to be reported online by creating a Capital Gains Tax on UK Property account through HMRC using your Government Gateway ID. Once this is submitted, HMRC will issue a payment reference, under which a payment on account of the estimated CGT due can be made.
Working through this process takes time so being aware of the rules before a sale is made is key to efficient tax planning.
Penalties
If you fail to submit an online CGT return or miss the 60-day deadline, the penalties for late filing are:
– more than 60 days of completion of a sale is £100;
– more than 6 months after completion of a sale is £300 or 5% of the tax outstanding, whichever is the higher;
– more than 12 months after completion of the sale is £300 or 5% of the tax outstanding, whichever is the higher.
Interest may be charged in addition to any penalties incurred.
Here to help
Residential property disposals and Capital Gains Tax liabilities may not be straightforward. We can assist you with planning and reporting requirements, whilst ensuring you receive all available tax reliefs.