The rules around Capital Gains Tax and property sales are continually changing and many homeowners and their advisers may not be aware that they owe tax on the disposal of a property. 

Typically, when a main home is sold no CGT is due. However, in some circumstances, you may have to pay tax, at a rate of either 18 per cent or 28 per cent, on the gains you have made. 

Who is affected?

Those who own a property other than their main residence will have these CGT rules applied to them. 

This includes let properties, second or holiday homes and homes with significant grounds and gardens, as they may not benefit from Principal Private Residence (PPR) relief. 

You only have to pay CGT on gains that exceed your annual allowance (the current tax-free allowance is £12,300 per person).

If you are the sole owner of a property, you can double your allowance on a future sale by sharing ownership with your spouse.

Any Capital Gains Tax (CGT) due on UK residential property disposals made by UK residents must be reported and paid within 60 days of completion.

How to report CGT 

To report the sale of a UK residential property to HM Revenue & Customs (HMRC) it may be necessary to create a Capital Gains Tax on UK property account, which we can help with. 

This will allow you to:

  • Report the disposal of UK residential property or land;
  • Pay any tax owed for that disposal; and
  • View previous and current returns.

Whilst there are some exemptions from completing a return, for example where no tax is due, the short deadline gives limited time to retrieve supporting documentation, prepare CGT calculations or obtain valuations if needed.

Non-UK residents must also report all sales or disposals of UK property (residential and non-residential) within 60 days – even if there is no tax to pay or they have made a loss. 

Act now

It is easy to overlook these requirements during the sale of a residential property, but this information must be reported to HMRC within this new time frame and any tax paid. 

Penalties and interest for late filing are no longer linked to the tax return filing deadlines, which were previously made on an annual basis. 

The new rules surrounding CGT on property sales are complex and so it is worth seeking advice if you are unsure of how this affects you or those you support. 

If you have any queries about the CGT implications of selling a property or you have other concerns about property tax, please contact our tax team Eddie or or call 01494 552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 4th May 2022.

Posted in Blog news.