A few landlords have asked us if they need to use HMRC’s new digital reporting system to make a capital gains tax disclosure, even if there’s nothing to pay.
When you dispose of a buy-to-let property, you have to consider the capital gains tax implications and ensure you report and pay any tax you owe within 30 days of the sale going through.
If a loss is made or the gain is covered by the capital gains tax annual allowance (£12,300 in 2021/22, frozen until 5 April 2026) or by a relief, then no report or disclosure is required if you are resident in the UK.
Non-UK residents have to make a report whether there is tax to pay or not. That sounds straightforward and feels right to me.
Should someone at HMRC advise you that you don’t need to disclose, get that in writing – or at least keep a dated record of the conversation and the name of the individual officer in case you’re challenged later.
Actually, that’s worth remembering as a good rule for dealing with HMRC in general.
Are there downsides to disclosing?
Quite simply, no. Failure to disclose capital gains tax after completing the sale of a buy-to-let property will result in you getting a penalty and having to pay interest on any outstanding capital gains tax liability, so there’s no point risking it.
Yes, it can take a bit of time and there’s plenty of paperwork involved with selling one of your properties, but those are not valid reasons to shy away from disclosing.
While we always advise being methodical and thoughtful in your dealings with HMRC, and getting our advice as you go, evidence of openness and good faith will probably stand you in good stead in the long term.
The 30-day rule
If you complete the sale of a residential property from your buy-to-let portfolio, any capital gains tax owed needs to be reported and paid within 30 days of completion of the sale.
If you don’t tell HMRC or us as your accountant, about any capital gains tax liability within the 30 days, you will get an initial £100 late-filing penalty. If you leave it a further six months there are additional penalties of £300 or 5% of the tax owed (whichever is greater) and the same again if you are 12 months late.
Non-residents would need to pay the late-filing penalty even if there is no tax to pay.
This applies to both UK and non-UK residential landlords who own second homes, properties that are not their main residence and, obviously, buy-to-lets. So it’s really important to be aware of this rule.
How to make a capital gains tax disclosure
Once we have all the details of your property sale, we at UK Landlord Tax collate all of the information before signing in to HMRC’s ‘capital gains tax on UK property’ portal to report and pay what’s owed within 30 days of completion.
If you are a non-UK resident for tax purposes and plan to sell a buy-to-let in the UK, a different payment service is used to report sales of UK property – also within 30 days of the sale going through.
Now, sales of UK residential and commercial property or land by non-UK residents must be reported through this method even if there is no capital gains tax to pay. That we do know without any clarification from HMRC being needed.
The rules for UK residential properties held in trust are similar to those for UK residents. The same 30-day rule applies, but this time, we login to the ‘capital gains tax on UK property’ account using a different unique taxpayer reference issued by the trust registration service.
Once we know what your gain is and what you owe, we advise you to use HMRC’s real-time capital gains tax service to settle your liability.
Beating the deadline ensures you don’t receive a late-payment penalty – and the further ahead of the deadline you are, the better, in case any questions do come up.
Let us know if you have any questions about the tax implications of selling one of your buy-to-let properties, although we’re not afraid to say you will be walking away from a great long-term investment.
We can advise you about the potential tax implications before you sell and handle all of your obligations once the transaction is complete. And we’re not afraid to pick up the phone and speak to HMRC if further clarification is needed.
For support with capital gains tax planning for your rental properties, get in touch with us today.