Posted: Feb 2, 2021

If you are planning to sell a residential property, you may need to pay tax sooner than you anticipated. Since April 6, 2020, anyone who makes a taxable capital gain from residential property has to pay the tax within 30 days of completion of the sale or disposal of the property.

New reporting regime for sales of UK residential property

Capital Gains Tax (CGT), is a tax charged if you sell, give away, exchange, or otherwise dispose of an asset and make a profit or 'gain'.

The changes affect UK resident individuals, and trustees disposing of UK residential properties. In most cases the sale of one’s home does not give rise to a chargeable gain.

Non-UK residents already have an obligation to report the disposal of such property. The new rules do not apply to transactions involving non-UK property.

What should I do next?

The report must be made online via the UK Property Reporting Service, and payment by using a ‘payment reference number’, and not by using the usual payment details for self-assessment. 

Therefore, where you also complete self-assessment tax returns the same disposal will be reported on two returns.

Late filing penalties apply for returns filed after the 30-day deadline and interest will be charged on any tax paid late.

As HMRC have access to land registry records and are increasingly comparing these to tax records to ensure that Capital Gains are being reported by the seller. Therefore, taxpayers selling a residential property, will need to extremely organised to ensure all relevant disclosures are made within the time limits. 

HMRC’s drive to accelerate tax revenue may see lots of people fall foul to penalties and surcharges. 

Get ahead by being prepared

Awareness and information gathering will be key to determining whether tax is due. Frequently, the taxpayer is unaware of the limitations of principle private residence relief (PPR) and will not anticipate that they might have a CGT liability to report and pay.

In order to make the return, an individual will need to sign up to HMRC online services and apply for a CGT account. Those completing their own tax returns will already have an HMRC online account, but those who do not will need to factor in the time it takes to do this. 

HURST as your agent is able to submit the returns your behalf, provided the appropriate agent authorisation is in place.

If you are affected by these rules or looking for professional assistance, please contact Tax Manager, Fiona Wheeler