If you sell or dispose of a residential property in the UK, you may be liable to pay Capital Gains Tax (CGT) on the profits you make. CGT is only charged on the gain made, not on how much you sell the property for. It is therefore important to understand what reliefs are available.
The gain is calculated after deducting the original purchase cost of the property from the proceeds of sale, along with any related fees such as Stamp Duty Land Tax, solicitor’s fees, estate agent’s fees etc. Other allowable costs and reliefs are available.
When is Capital Gains Tax due?
The current CGT annual exemption is £12,300. This means that in the current tax year you will only pay tax on gains made above this value. From the 2023/24 tax year the annual exemption will reduce to £6,000, with it reducing further in the 2024/25 tax year to £3,000.
Chargeable gains made on residential property must be reported to HMRC, and the taxes paid, within 60 days of completion.
If the property sold was at one time your home, you may be entitled to claim Private Residency Relief on the gain.
Who does the 60 day reporting requirement apply to?
The following persons are within the scope of the 60 day CGT rules:
- individuals;
- trustees;
- personal representatives;
- partners in partnerships and limited liability partnerships; and
- joint owners of property.
What are the CGT reporting requirements?
Capital gains on a residential property need to be reported as follows:
- the gain must be reported within 60 days from the date of completion of the sale;
- the capital gains due on the gain must also be paid within 60 days of completion of the sale;
- the gain needs to be reported online by creating a Capital Gains Tax on UK Property account through HMRC using your Government Gateway ID;
- you may need to disclose the gain on a Self-Assessment Tax Return.
It’s essential to comply with the CGT 60 Day Rule to avoid penalties and ensure timely reporting of any capital gains from property sales. Once the 60 day return is submitted, HMRC will issue a payment reference, under which a payment on account of the estimated CGT arising from the disposal can be made.
Are there any late filing penalties?
There are penalties for late filing and payment as follows:
- more than 60 days of completion of a sale is £100;
- more than 6 months after completion of a sale is £300 or 5% of the tax outstanding, whichever is the higher;
- more than 12 months after completion of the sale is £300 or 5% of the tax outstanding, whichever is the higher.
Please note that interest may be charged in addition to any penalties incurred. If you fail to meet the CGT 60 Day Rule, HMRC may impose late filing penalties, including charges for both late reporting and payment.
How we can help
If you’re considering selling or gifting a property, our tax planning services ensure you optimise reliefs and stay compliant with CGT rules. Our Tax Experts have a wealth of knowledge in residential property disposals and Capital Gains Tax liabilities. We can assist you with your tax computations and reporting requirements, whilst ensuring you receive all available tax reliefs.
If you are thinking about selling or gifting a residential property, contact Peter Alvarez, Tax Director, on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
