If you sell a residential property in the UK, you may need to file a Capital Gains Tax return within 60 days of completion.
Navigating the tax implications of a residential property sale can be a bit of maze, so we’ve asked Beth Hickman, Tax Senior, to outline the requirements that you need to be aware of.
Over to Beth…
Selling a residential property in the UK can have significant tax consequences, so it’s important to make sure you’re well informed if you are thinking of selling.
Below I’ve put together everything you need to know, so you can navigate the complexities of Capital Gains Tax requirements, to help minimise your tax liabilities and make informed financial decisions.
So, lets dive into the complicated world of Capital Gains Tax (CGT)…
Changes in Reporting Requirements
On the 6th April 2020, HMRC changed the reporting requirements for individuals selling residential properties. The change meant that sales of residential properties had to be reported on a separate Capital Gains Tax return, rather than just being included on a self-assessment tax return, which was the previous treatment.
These changes also meant that the deadline for payment of any Capital Gains Tax due from these sales has been shortened from the self-assessment payment date (31st January) to the new deadline of 60 days after completion.
It’s important to note that ‘selling a property’ also includes gifting a property to someone who is not your spouse/civil partner.
Exemptions and Non-UK Residents
If you did not make a profit on the sale, meaning your proceeds are lower than the original purchase cost or your gain is covered by losses, you are exempt from filing a Capital Gains Tax return.
However, non-UK residents are required to file a non-resident Capital Gains Tax return, regardless of whether a gain was made or not.
Payment of Capital Gains Tax
If you did make a profit and Capital Gains Tax is due on this, then it must be paid to HMRC within 60 days of completion.
Failure to file a Capital Gains Tax return or pay the Capital Gains Tax due can result in penalties and interest.
Capital Gains Tax Rates and Reliefs
Capital Gains Tax is charged on residential property gains at rates of 18% and 28%, depending on the rate band of which the gain falls into.
Certain reliefs are available against these gains, such as Principal Private Residence (PPR) relief. If the property has been your main residence at any point during your ownership, you may be eligible for this relief. Letting relief may also apply in certain situations.
Additionally, enhancement expenditure can be deducted from your proceeds, further reducing the taxable gain.
