New UK capital gains tax rules: Pay in 30 days or face penalties

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Do not wait until the next tax year to report gains on UK residential property sold after 6 April 2020. You may have to pay interest and a penalty if you do.

When do you have to pay Capital Gains Tax on a property?

Capital Gains Tax (CGT) is paid when you earn a profit from selling a property that is not your primary residence. If you sell your main home, you won’t have to pay any tax unless it was used as a business premise or if you let out all or part of your property.

New rules for UK tax residents

Prior to the rule change, when you sold a residential property, you would have until the next Self Assessment deadline (31 January) to declare any profit made from the sale and pay the tax due. As of 6 April last year, if you make a profit off a sale as a landlord or second home owner you must pay the tax owed within 30 days.

Penalties for late filing

If you miss the 30-day deadline, you’ll receive a late filing penalty and will be charged interest. Penalty fees vary and are dependent on how much time has passed since the deadline:

Months since deadline Penalty fee
Up to six months £100
More than six months A further penalty of £300 or 5% of any tax due, whichever is greater
More than 12 months A further penalty of £300 or 5% of any tax due, whichever is greater

How do I determine if a property is my main home?

If you occupy more than one home, you can nominate which one will be tax free. Your main home does not need to be the one you live in most of the time. You have two years from when you purchase a second home to make your nomination. Usually, it makes sense to nominate the home you expect to make the biggest gain on when you sell.

If you are married, you and your partner can only have one main home. Unmarried couples can each nominate a different home.

It’s important to note that tax relief does not apply if you only bought your home to make a gain from it.

When you need to pay Capital Gains Tax

  • You are selling a house or flat that you bought as an investment
  • You are selling a second home – such as a holiday home
  • You bought the property just to make a gain
  • You inherited the property

How is UK Capital Gains Tax calculated?

You gain is the difference between what you paid for your property and the amount you get when you sell or dispose of it. You only have to pay CGT if your overall gain is above your tax-free allowance. Currently, the Capital Gains tax-free allowance is £12,300.

Using the market value to work out your gain

You should use the market value if the property was:

  • A gift – use the market value at the date the gift was given
  • Inherited – use the market value at the date of death
  • Purchased before April 1982 – use the market value at 31 March 1982

Reporting and paying you capital gains

To report any capital gains, you’ll need:

  • Calculations for each capital gain or loss you report
  • Details of how much you bought and sold the property for
  • The dates when you took ownership and disposed of the property
  • Any other relevant details, such as the costs of buying or disposing of the property and any tax reliefs you’re entitled to

How to report your Capital Gains Tax

To report your CGT, you’ll need to sign in with your Government Gateway user ID and password via the Government Gateway portal. If you don’t have an account, you must create one.

Once you’re signed in, you’ll need to create a Capital Gains Tax on UK property account which will allow you to report and pay the tax.

UK residents or those representing a trust can use this service to:

  • Report the disposal of UK residential property or land from 6 April 2020
  • Pay any tax you might owe for that disposal
  • View and change your previous returns

Non-residents can use this service to report sales or disposals from 6 April 2020 of:

  • Residential UK property or land
  • Non-residential UK property or land
  • Mixed use UK property or land
  • Rights to assets that derive at least 75% of their value from UK land (indirect disposals)

Non-residents are required to report all sales or disposals of UK property, even if you have no tax to pay or have made a loss.

If you’re considering selling a property that has not been a primary residence for the full period of ownership, it’s a good idea to plan ahead.

We can forecast personal tax calculations for you to give you a good idea of what your CGT position will be. Contact us on +44 (0) 20 7759 7553  or send us an email and we’ll provide you with the expert advice you need.

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