Since 6 April 2020, anyone selling a UK residential property now has 30 days to report any capital gains to HMRC and pay the tax due. This is a significant change from earlier rules, and one that could prove costly for any property owners who miss the deadline.
If you sell an asset that has increased in value, that means you have made a profit. This profit is then subject to a type of tax known as Capital Gains Tax (CGT). Your primary residence will usually be exempt from CGT under the Private Residence Relief rules.
However, any other property which you have never used as your main residence will be liable for CGT, such as holiday homes and buy-to-lets. This also includes any property which you inherited but did not use as your main residence.
While the above criteria for CGT still apply, changes have been made to how you report those profits and pay the tax due.
Previously, any profits needed to be included on your self-assessment form for that tax year. The deadline for self-assessment is 31 January the following year.
However, the new rule now means that both UK and non-UK residents must report any profits and pay the tax due within 30 days of completion.
For example, if your property is sold on 1 June 2021, then you have until 30 June 2021 to report your gains and pay the tax.
If you need to report capital gains, then you will need to create a Capital Gains Tax on UK property account directly with HMRC.
This can be done online and will require a Government Gateway ID. If you don’t have one, then this can take up to 10 days to arrive, so it’s best to register as soon as possible in order to avoid delays.
You won’t need to file a report if you sell the property at a loss, the property is outside of the UK, or the profit falls within your tax-free allowance.
If you don’t report your capital gains within 30 days of completion, then you might end up with a penalty and have to pay interest on the amount of tax owed. This means the amount owed will be a lot more than the original amount, so it’s always best to report your earnings as soon as possible.
Dealing with taxes can be confusing enough at the best of times without worrying about tight deadlines. Whatever stage you’re at in the sales process, make sure to seek professional advice to help you stay on the ball. That way, you can make sure you have all the information you need ready to start filling out your report and avoid incurring any late penalties and interest.
For expert legal advice, contact the Fodens team on 01952726111 or email hello@fodens.co.uk
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