Reporting and payment of capital gains tax on UK property disposals 

Home 9 Reporting and paying CGT

A disposal of a property will be liable to Capital Gains Tax if the property is sold, gifted or transferred to someone else, other than your spouse or civil partner.

UK residents are required to report any Capital Gains Tax liability and pay any Capital Gains Tax due within 60 days of the completion of the sale where there is a liability to Capital Gains Tax.

The report and payment must be made using HMRC’s digital UK Property Service.

The sale will also then need to be declared on your Self Assessment tax return if one is required. 

One-off disposal

For a ‘one-off’ disposal, there may be no need to register for Self Assessment and submit a Self Assessment tax return. The report and payment of Capital Gains Tax can be made through the new service.

If there is no tax to pay i.e. a loss is made or the gain is covered by annual exemption allowance or other relief, then no report will be required.

 

 

Non-residents

Non-residents who dispose of a property (whether it is residential or not) must report disposals and pay any tax to HMRC within 60 days of the completion of the sale. Unlike UK residents, all disposals must be reported within 60 days whether there is tax to pay or not.

 

How to report

To use the service individuals will need to register for the new digital service if they intend to make the report themselves and not use an agent. Individuals wishing to use an agent to make the report will need to set up a Capital Gains Tax account with HMRC and provide their agents with a CGT reference.

 

Disposal and completion dates

The date that contracts are exchanged on the sale of a property is the date of disposal. It is that date that will determine the tax year in which the gain occurs. The completion date is normally the date that the proceeds are received and the keys are handed over to the new owner which will determine the start of the 60 day period for reporting and paying Capital Gains Tax.

 

Penalties

If the report is not made or the tax is not paid within the 60 day period then late filing penalties and interest will be applied in a similar way to that of self assessment i.e. £100 automatic late filing penalty with further penalties applied after 6 months and 12 months for non-filing and interest on late payment of tax.

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 60 days. The individual has 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 they are required to submit one.

 

Multiple disposals

If multiple disposals are made within the same tax year, then a separate return must be made for each property unless exchange of contracts and completion occur on the same date. A loss made on a previous disposal can be included within the calculation for Capital Gains Tax so long as the loss was reported to HMRC.

If a gain has been made on an earlier disposal and CGT paid to HRMC within 60 days, then a repayment can be claimed through the new service if a loss is made on a subsequent disposal or if expected income for the tax year is considerably lower and the higher rate of tax has been used in the original calculation.

 

Frequently asked questions

 

Q: Can I offset capital losses on shares against capital gains on property?

A: In the UK, you can offset capital losses on shares against capital gains on property under certain circumstances.

Here are some key points to consider:

– Capital losses on shares can be offset against capital gains on property for tax purposes.

– The losses must be reported in your self-assessment tax return.

– The losses can only be offset against gains made in the same tax year or carried forward to offset future gains.

– It’s important to keep accurate records of your losses and gains to ensure proper reporting.

However, it is advisable to consult with a qualified tax professional to understand the specific rules and regulations regarding offsetting capital losses on shares against capital gains on property in your individual situation.

Q: Do you pay capital gains tax if you reinvest in another property?

“If you reinvest the proceeds from the sale of a property into another property in the UK, you may be eligible for Capital Gains Tax (CGT) relief. Here are some key points to consider:

– Rollover Relief: Rollover Relief is a form of CGT relief that allows you to defer paying tax on the gain made from selling a property if you reinvest the proceeds into another qualifying property. This relief is available for certain trading assets and furnished holiday lettings, but it is not generally available for buy-to-let properties.

– Conditions for Relief: To qualify for Rollover Relief, you must meet certain conditions, such as reinvesting the entire proceeds or a substantial portion of the proceeds into the new property within a specific time frame. The relief is not automatic, and you need to make a claim to HM Revenue and Customs (HMRC) to benefit from it.

– Consult a Tax Specialist: It’s important to seek advice from a tax specialist or accountant who can guide you through the specific requirements and implications of reinvesting in another property. They can help ensure that you meet all the necessary criteria and make the appropriate claims for CGT relief.

Q: Do you pay capital gains on your main residence?

A: In the UK, you may have to pay capital gains tax on the sale of your main residence depending on certain factors. Here’s some information to consider:

– Capital gains tax (CGT) is a tax on the profit made from selling or disposing of an asset, including a main residence.
– However, there is a tax relief called Principal Private Residence (PPR) relief that can exempt you from paying CGT on your main residence.
– If you have lived in the property as your main residence for the entire period of ownership, you may be eligible for full PPR relief, meaning no CGT would be payable on the sale.
– If you have not lived in the property for the entire period of ownership, you may still be eligible for partial PPR relief, which can reduce the amount of CGT payable.
– It’s important to note that there are certain conditions and criteria that must be met to qualify for PPR relief, such as using the property as your main residence and not letting it out extensively.
– Additionally, if you have used the property for business purposes or have claimed tax relief for certain periods, it may affect the availability of PPR relief.

Q: Do I need to pay tax when I sell a property?

A: When you sell a property, you may be liable to pay Capital Gains Tax (CGT). The tax is applicable to both residents and non-residents. However, the rules and rates may vary depending on your residency status and the type of property you are selling. It is important to note that there are certain exemptions and reliefs available that can help reduce your CGT liability. To determine your specific tax obligations and explore any potential exemptions or reliefs, it is advisable to consult with UK Landlord Tax directly as we can provide personalized guidance based on your individual circumstances.

Q: Do I pay tax in UK if I sell property abroad?

A: If you sell a property abroad, whether you need to pay tax in the UK depends on your residency status and the specific tax laws. Here are some key points to consider:

– UK Resident: If you are a UK resident, you are generally subject to tax on your worldwide income and capital gains. This means that if you sell a property abroad, you may need to report and pay tax on any capital gains in the UK.

– Non-UK Resident: If you are a non-UK resident, the tax implications can vary. Non-residents are typically only taxed on income and gains arising in the UK. However, there may be specific rules and tax treaties between the UK and the country where the property is located that could affect your tax liability.

– Double Taxation Treaties: The UK has double taxation treaties with many countries to prevent double taxation on the same income or gains. These treaties often determine which country has the primary right to tax certain types of income or gains. It’s important to consult the specific treaty between the UK and the country where the property is located to understand your tax obligations.

– Reporting Requirements: Regardless of your residency status, it’s essential to comply with the reporting requirements of both the UK and the country where the property is situated. This may involve filing tax returns, disclosing the sale, and paying any applicable taxes within the specified timeframes.

Given the complexity of international tax matters, it is advisable to seek professional advice from a tax specialist who can provide personalized guidance based on your specific circumstances.

Q: Do I pay capital gains tax on an inherited property?

A: Capital gains tax may be applicable on an inherited property, depending on certain factors.

Here are some key points to consider:

– Inheritance tax is separate from capital gains tax. Inheritance tax is paid on the value of the deceased person’s estate, while capital gains tax is paid on the increase in value of an asset when it is sold or transferred.

– When you inherit a property, the value of the property at the time of inheritance becomes the new base value for calculating capital gains tax if you decide to sell it in the future.

– If you sell the inherited property immediately after inheriting it, there may be little to no capital gains tax liability, as the increase in value during a short period is likely to be minimal.

– However, if you hold onto the inherited property for a longer period and its value increases, you may be liable to pay capital gains tax on the gain when you eventually sell it.

 

Q: How do individual customers access the new CGT service?

A: Individuals can register and subscribe to the service via Gov.UK.

 

Q: Are you, as my Agents, able to access the new CGT service on my behalf?

A: Yes, an Agent must be registered with the existing HMRC Agent Service and create an Agent-Client relationship. The client can electronically authorise the Agent to act on their behalf.

 

Q: How, and by when, do I pay the CGT charge?

A: You will need to report the disposal and pay any CGT due within 60 days of the completion of the disposal. Reporting and payment will be made electronically. Customers will report using the new online CGT Payment on Property Disposal system. Further information is available on gov.uk. For digitally excluded customers offline reporting will be possible. Further information on offline reporting will also follow in due course.

 

Q: Will I incur a late filing penalty if I file my CGT Payment on Property Disposal return late?

A: Yes, the penalties for CGT Payment on Property Disposal returns are calculated in the same way as Self Assessment under Schedule 55 of the Finance Act 2009, apart from daily penalties (which aren’t charged for CGT Payment on Property Disposal returns). The filing deadline for a CGT Payment on Property Disposal return is within 60 days of the completion of the sale. If a return is filed more than 60 days following the completion of the sale it is late and attracts a late filing penalty of £100. Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months after the completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.

 

Q: If the gain is calculated as being below the individual personal allowance, do I still have an obligation to report to HMRC?

A: If the gain is below the annual exempt amount or is covered by Private Residence Relief, there is no obligation to report the disposal if you are resident in the UK. If you are non-resident then you still have to report the gain even if it is below the annual exemption.

 

Q: If someone wasn’t non-resident at time of sale but became non-resident during the tax year do these rules apply?

A: Non-residents must also report the disposal of UK residential property interests within 60 days of the date of completion of the disposal and pay any capital gains tax that is due.

 

Q: If an individual is not in Self Assessment and sells a property, how long does it take to register for the new Digital service?

A: Registration can be completed in minutes.

 

Q: Do all clients need a UTR in order to submit a CGT on UK Property Return?

A: A UTR is one of several identifiers that can be used to report and pay CGT.

 

Q: Do I have to inform HMRC when I sell my house?

A: When you sell your house, it is important to inform HM Revenue and Customs about the sale. Here are a few key points to consider:

– Reporting capital gains tax: If you make a profit from the sale of your house, you may be liable to pay capital gains tax (CGT) on the gain. You must report the gain to HMRC within 60 days of the completion of the sale and pay any CGT owed within the same timeframe.

– Online disclosure: You are required to file an online disclosure with HMRC, providing details of the sale and the amount of CGT payable. This must be done within the 60-day deadline.

– Non-resident sellers: If you are a non-resident and sell a property in the UK, you are also required to make a report and pay any CGT owed within 60 days of completion.

– Penalties for non-compliance: Failure to notify HMRC or pay the CGT on time may result in penalties or, in extreme cases, prosecution.

It is important to note that tax rules and regulations can be complex, and they may vary depending on your individual circumstances. Seeking professional advice from UK Landlord Tax or a qualified tax advisor can help ensure you fulfill your obligations and avoid any potential penalties

Q: Do the new rules apply to gifts?

A: Yes, the new rules apply to gifts of UK residential property.

 

Q: I thought the law would also cover the disposal of non-UK residential property by a UK resident?

A: No, the new rules only cover the disposal of UK residential property interests. The disposal of a non-UK property that gives rise to a capital gain for the individual, will need to be declared via Self Assessment.

 

Q: Will I be given a reference to make the payment under?

A: Yes, customers will be given a payment reference number once they have submitted their CGT Return.

 

Q: Will the CGT Liability be paid in the same way as Self Assessment through a UTR?

A: Customers will be required to pay using a payment reference number once they have submitted their CGT Return. The CGT reference is separate to the UTR.

 

Q: How do you obtain a CGT reference?

A: By registering for a CGT account via Gov.UK.

 

Q: What happens if someone doesn’t have an online bank account?

A: There are several ways for customers to make payment, including through non electronic means.

 

Q: Will the CGT paid on account show on my Self Assessment account?

A: The Self-Assessment online should be updated to include reference to CGT payment on account.

 

Q: How does this affect disposals of a whole property where part of it has been let i.e. annexe or flat within the main residence?

A: The disposal will need to be reported within 60 days of the completion of the conveyance.

 

Q: Can you partially complete a declaration and return to it a day or two later with the final information?

A: Yes, save and retrieve functionality will be available to allow taxpayers to return to a part completed Return that has not yet been submitted to HMRC.

 

Q: What should I do if I do not have the final figures ready to make the report within the 60 day deadline?

A: Do not delay in making your report. You can use estimated figures to ensure you report within 60 days and then amend the figures when you have final figures available. The amendment can either be done via the new digital service or on your Self Assessment form, if you are required to submit one.

 

Q: Can you use the annual exempt amount against a residential property gain even if you know you will make other disposals to be reported on the tax return during the tax year?

A: The calculation of the amount of tax notionally chargeable ignores disposals which have a later completion date. In this case the annual exempt amount would have to be used against the residential property gain – ignoring the later disposal.

 

Q: Are the rules to do with the disposal of land as well as residential property?

A: For UK residents these rules are for direct disposals of UK land on which a residential property gain accrues. If the disposal is of land that is not classed as residential property, then these rules do not apply and any gain will need to be declared via Self Assessment (the definition of residential property is at Schedule B1 Taxation of Chargeable Gains Act 1992). For non UK residents, all disposals of land and buildings must be reported within 60 days of completion.

 

Q: How do Trusts access the new CGT service?

A: A Trustee will register and subscribe to the service using the Trust UTR no. If the Trust is not yet registered, the Trustee must register the Trust with the TRS (Trust Registration Service) and use a Temporary Reference Number, which will be provided once registration complete to register and subscribe to the CGT PPD service whilst they wait for the Trust UTR no.

 

Q: Do these new rules apply to periods of administration in deceased estates?

A: Yes, the new rules apply to personal representatives.

 

Q: Can I sell my main residence and move into my second home?

A: Yes, you can sell your main residence and move into your second home. However, it’s important to consider the tax implications of such a decision. Here are a few points to keep in mind:

– When you sell your main residence, you may be eligible for Principal Private Residence Relief (PPR), which provides tax relief on the sale of a property that has been your main residence at any point during your ownership.
– If you move into your second home and make it your main residence, you can potentially claim PPR on that property when you sell it in the future.
– It’s worth noting that if you sell your second home, it may be subject to Capital Gains Tax (CGT) on any profit made from the sale. However, you may be able to offset this with the annual CGT allowance and any applicable reliefs.
– It’s always advisable to seek professional advice from a tax specialist or accountant to understand the specific tax implications and any potential planning opportunities when selling your main residence and moving into a second home.

Please keep in mind that tax rules can be complex and subject to change, so it’s essential to consult with a professional to ensure you make informed decisions based on your individual circumstances.

 

DISCLAIMER
© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S S Thandi and M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.

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