Capital Gains Tax on sale of UK residential property

Capital Gain Tax (CGT) Rules 

Individuals, disposing of a home that is not their main residence must pay CGT on any profit they make from the sale after deduction of any allowable expenses and allowances. The taxable gain is treated as the “top slice” of their income and basic rate taxpayers will be taxed at a rate of 18%, while higher and additional rate taxpayers will be taxed at 28%. As the gain is the top slice of their income, it is possible for some of the gain to be taxed at 18% with the rest at 28%.

Reporting and Payment Obligation

CGT on the disposals of UK residential property was payable and reportable to HMRC on 31 January following the tax year in which the gain was made.

However, disposals of UK residential property completed on and after 6 April 2020 by UK tax residents, who have a tax liability arising on a capital gain, have had to make an online report of the gain to HMRC, and pay the CGT due, within 30 days of completion. For disposals that are completed on or after 27 October 2021, the reporting and payment deadline will be 60 days after the completion date.

Non-UK tax residents have been obliged to report any disposals of any UK property or land (residential or commercial) and pay any CGT due within the same time limits. This is irrespective of if they have any capital gains tax due.

The disposal will then be required to be reported to HMRC on the Self-assessment Tax Return for the relevant year but with a credit for the tax already paid on account via this system. 

Trustees and Personal representatives of someone who has died will also have to comply with the above reporting and payment window. They will pay 28% tax on gains of residential property. 

Penalties

If the report is not made or the tax is not paid within the 30/60 day period, then late filing penalties and interest will be applied in a similar way to that of self-assessment:

• £100 automatic late filing penalty,
• after 6 months, a further penalty of £300 or 5% of any tax due, whichever is greater,
• after 12 months, a further penalty of £300 or 5% of any tax due, whichever is greater.

Interest on late payment of tax:

• Late payment interest charged daily (currently 7.5% per annum from 11 July 23)
• 5% surcharge if CGT is not paid by 30 days after 31 January following the end of the tax year of disposal.

Other penalties may be applicable in certain circumstances.

If actual figures are not available when making the report to HMRC then estimated figures can be used rather than delaying making the report after 30/60 days. Individuals have 12 months to go back and amend the return when actual figures are available. Alternatively, they may choose to amend the figures on their self-assessment return if one is required.

We can assist you with capital gains tax reporting requirements. Please do not hesitate to contact us if you would like assistance with your tax reporting obligations.

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