Capital Gains Tax on UK Residential Property

Did you know?

From 6th April 2020, any individual who owes UK Capital Gains Tax (CGT) on the disposal of an interest in a UK residential property will now be required to file a CGT return within 30 days of completion. This procedure already existed for individuals who are resident outside of the UK (Non-Resident Capital Gains Tax) but this will now include anyone disposing of a direct or indirect interest in a UK residential property. This is mostly going to affect individuals who own multiple properties, a buy-to-let or who have inherited a property. 

What do I need to do?

If you sold a UK residential property after 6th April 2020, then the first thing to do would be to work out whether you will owe any UK capital gains tax. If you do, then you will need to make a submission via HMRC’s Capital Gains Tax on UK Residential Property Service. Fear not though, it is possible for an agent to complete this submission on your behalf. You will need to register for the service and provide your agent with a CGT reference number which they will use to make the submission.

Please note that if you sell a UK property that is owned jointly, both owners will be required to file a separate CGT return to report their share of the capital gain.

How do I calculate the gain?

There are no changes to the way capital gains tax is calculated. All the pre-existing reliefs and allowances are still available to reduce your chargeable gain. These include (but not limited to):

If there is no capital gains tax to pay, then you do not have to file a CGT return. If you have sold your only and main home, then it is unlikely that there will be any Capital Gains Tax to pay and therefore no requirement to file.

HMRC also have a useful tool available to help taxpayers work out their gain – https://www.gov.uk/tax-sell-property/work-out-your-gain

When do I have to file this CGT return?

You will be required to file the CGT return and pay the tax due within 30 days of completion following the disposal.

Definitions

Disposal Date – the date the contracts are exchanged

Completion date – usually the date on which the keys to the property are handed over

Any other capital gains tax that has arisen on the sale of other assets that are not an interest in a UK residential property will be payable with the usual Self-Assessment (SA) tax return and should not be included with the CGT return submission.

It is possible to report multiple property sales on the same CGT return, but the submission must be made within 30 days of the completion of the first sale. If you sell another property 30 days after the first sale, then you should submit a separate CGT return.

Do I still need to file a CGT return even if I am registered for Self-Assessment?

Yes, but only if you are required to do so. A capital gain made on the sale of UK residential property will not give you a filing requirement for a self-assessment tax return on its own. Capital gains tax from a one-off disposal can now be paid via a CGT return without the need to register for self-assessment. However, if you are required to file a self-assessment return for some other reason, then you will need to report the property sale and the advance CGT payment on your usual self-assessment tax return.

You can use this HMRC tool to determine whether you are required to file a Self-Assessment return – https://www.gov.uk/check-if-you-need-tax-return

What if I miss the deadline for filing the CGT return?

There are penalties for missing the deadline and these are inline with the usual self-assessment penalty regime. For example, you will incur a £100 penalty for not filing within 30 days of completion and will be charged interest on the outstanding tax from this date. More details about HMRC’s penalty regime can be found here – https://pjdtax.co.uk/updates/missed-the-201617-uk-tax-return-deadline/

What information do I need to submit the CGT return?

You will need to report full details about the property and the calculation of the gain. This includes details of acquisition and sale as well as any capital improvements made. HMRC understand that this information may not be easily available in the required timeframe and will accept estimate figures on the basis that the CGT return is amended as soon as the final figures are available. At this stage we are unsure whether HMRC will charge interest on any underpayment made due to estimate figures, but this is highly likely.

What if I don’t live in the UK?

Individuals who are not resident in the UK, who sell a UK residential property, are still subject to Non-Resident Capital Gains Tax (NRCGT) but with one change to the previous legislation – there is now no longer an option to defer the tax. The tax must be paid with the submission of the CGT return within 30 days of completion. The process for reporting the gain is virtually the same and can be done via the same service. The only real difference is that a Non-Resident Capital Gains Tax Return must be filed, even if there is no tax due. More information on this can be found here – https://pjdtax.co.uk/updates/non-resident-capital-gains-tax/

We can help.

Please feel free to get in touch if you require any more information on this topic or need assistance with filing of the CGT return. As with everything related to tax, it’s not always as simple as it may seem. The above information should not be taken as tax advice because everyone’s situation is different and some of these details may not be relevant to you.