Capital gains reporting requirements

If you are thinking of selling a residential property which is not your main residence then there are property tax issues to consider.

One of these obligations is the new Capital Gains Tax (CGT) reporting requirement that came into effect on 6 April 2020.

What you need to pay

Depending on your current situation, there are areas of capital gains tax that are chargeable that you will need to be aware of.

If you’re a higher or additional rate taxpayer, you’ll pay 28% on your gains from residential property and 20% on your gains from other chargeable assets.

However, if you’re a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.

You will need to work out how much taxable income you have, this is your income minus your personal allowance and other income tax reliefs you’re entitled to. Then work out your total taxable gains, followed by deducting your tax-free allowance from your total taxable gains and add this amount to your taxable income. If the amount you end up with is within the basic income tax ban, you’ll pay 10% on your gains (or 18% on the residential property). You’ll pay 20% (or 28% on the residential property) on any amount above the basic tax rate.

If you have gained from both residential property and other assets, you can use your tax-free allowance against the gains that would be charged at the highest rates (for example where you would pay 28% tax).

Note that if you are a trustee or personal representatives of someone who has passed away, you will have to pay 28% on residential property and 20% on other chargeable assets. Also note, your main residence will be excluded from capital gains tax.

When to pay and what actions you need to take

CGT is normally due and payable in full on 31 January following the year in which the gain was made but for disposals made on or after 6 April 2020, those disposing of residential property, that are chargeable to CGT, will be required to make an online report and pay any CGT due to HMRC within 30 days of the completion of the disposal. 
This is essentially a payment on account towards the tax due for payment in respect of the gain arising, and the disposal will then be required to be reported to HMRC on a self-assessment tax return as it is currently, with relief being given for any tax paid on account via this system.

This means that any disposals of UK residential properties made by an individuals, trustee or personal representative where there is a CGT liability to pay must be reported to HMRC no later than 30 days after the date of completion of the disposal. This is in addition to reporting the gain on your annual self-assessment tax return, if required.

Late filing of report to HMRC 

  • £100 late filing penalty 
  • Greater of a further £300 penalty or 5% of tax due if more than 6 months late 
  • Greater of a further £300 penalty or 5% of tax due if more than 12 months late 

Late payment of tax   

  • Late payment interest charged daily (currently 2.6% per annum) 
  • 5% surcharge if tax not paid by 31 January after the end of the tax year of disposal. 

Written by Sarah Sargent, Tax manager

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