Since April 2020, all UK residential properties disposed of by UK resident taxpayers – that create a taxable gain for Capital Gains Tax (CGT) purposes – will have to be reported to HMRC within 60-days of the disposal. Any CGT payable will have to be paid over to HMRC in the same 60-day window. Generally, this will include sales of second homes and buy-to-let property.
What if I sell a property and don’t make a taxable profit?
The new 60-day disclosure deadline only applies, in practice, to property disposals that create a taxable gain. For example, if you sell a buy-to-let property and make a loss on sale you will not have to make a return within the 60-day window.
Does this mean I have to submit a tax return every time I sell a property?
Effectively, yes it does, although restricted to details of any property disposal that creates a chargeable gain. Penalties may apply if you file outside the 60-day window.
How do I work out how much tax is payable?
As part of the 60-day submission to HMRC, you are required to estimate the amount of CGT payable based on your present understanding of the factors that affect this liability. As your other earnings will determine if the CGT you pay is at 18% or 28% – or a mix of the two – estimating these other earnings and getting the number crunching right will be no mean feat.
During the 60-day window you will need to: prepare a formal computation and a calculation of the CGT due, and submit both to HMRC, and pay any CGT this computation reveals.
At the end of tax year during which you made the disposal you will also need to include the computation again as part of your actual return. This annual confirmation of the gain may result in an over or under payment of tax as the annual return will be based on actual data and not the estimated data used to comply with the 60-day rule.
We can help. Read the section that follows.
Advise us in advance if you intend to sell a chargeable property
We can only help you meet the 60-day deadline if we have the required information about the disposal on the day you sell. The stepped approach set out below is our suggested timeline for gathering and reporting each gain:
- Prior to the completion date, advise us which property is to be sold and the estimated selling price and sales costs.
- We will immediately draw together with you the data we need about the property and confirm with you that this is correct. This will not only include the purchase price, but also improvements made since you bought the property.
- We will use this information to prepare a draft computation (based on our prior knowledge of your tax affairs) and advise you of the possible CGT payable 60-days after the sale completes.
- When the sale does complete, we can then adjust the numbers for any final changes in the sale particulars and agree the computation with you.
- Once agreed, we can file the CGT computation with HMRC and advise you when and where you should pay any tax due.
To meet these relatively new reporting regulations, we will need to move quickly to meet the 60-day deadline and would request that you contact us immediately if you are planning to sell.
This article has been updated to reflect increase in time limit for reporting sale from 30 to 60 days in October 2021.
For more information or to discuss any issues raised above please contact Simon Bell by phone on 01376 571358 or email [email protected] . This article is written in general terms and therefore cannot be relied on to cover specific situations; applications of the principles set out will depend on the particular circumstances involved and it is recommended that you take