Significant changes to the reporting and payment of capital gains tax (CGT) on the disposal of UK residential property came into effect from 6 April 2020 which apply to both UK and non-UK resident individuals.
What has changed?
From 6th April 2020, an individual, trust or executor/executrix of an estate who sells a UK residential property may be required to complete a ‘real time’ CGT return and pay any CGT due within 60 days of the date of disposal if completion was on or after 27 October 2021 (30 days if completion date was between 6 April 2020 and 26 October 2021).
Previously, the disposal of UK residential property would be reported via ones UK self-assessment tax return on the capital gains tax pages for the relevant tax year in which the sale took place, with payment not falling due until 31st January in the following year.
Under the new reporting regime, the capital gain will still need to be reported on the self-assessment tax return, but this will be supplementary to the real time tax return and the payment of CGT required within 60 days of completion.
Who is impacted?
As mentioned, these changes apply to any individual, trustee, executor or executrix of an estate who sells/disposes of a UK residential property from 6 April 2020 onwards. If any interest in a UK residential property is held by any of the above, there will be a requirement to complete a CGT return to report the sale and to pay the CGT liability within 60 days of the date of completion (not the date of exchange).
For UK residents, a return will not be required if there is no CGT liability, i.e. a CGT return will not be required if there is a loss on disposal or if the gain is covered by the CGT annual exemption (£6,000 for 2023/24 reducing to £3,000 from 2024/25) or if current year losses arising prior to the date of exchange cover the gain.
For non-UK residents, a non-resident CGT return must be completed within 60 days of the disposal of any UK property, regardless of whether a profit or loss is made upon sale with any CGT due to be paid within 60 days of completion. The only exemption to this is where the property was the main residence for the entire period of ownership (which would generally be rare for those who are non-UK resident).
Type of property
All UK residential property that is not occupied as a main residence will fall within the reporting requirements.
Therefore, if you own an interest in a property which you do not occupy, i.e. it is let out as a buy to let or is held as an investment property, you will need most likely need to complete a capital gains tax return.
The new reporting requirements have now been in place since April 2020, however, we are seeing that many taxpayers are still unaware of the current rules.
Implications of not meeting the reporting requirements
If you meet the conditions requiring you to complete a capital gains tax return and you subsequently fail to report and pay any tax due within the 60-day deadline, HMRC will issue both late filing and payment penalties. Interest will also be charged on any late paid tax.
HMRC have access to the land registry and therefore are fully aware when a change in ownership of UK residential property occurs.
Overview of the reporting and payment process
The steps below outline what needs to be done upon completion of the sale:
- All matters need to be processed, filed and the tax paid within 60 days of completion.
- Collate details and documentation relating to the property purchase and sale, including completion statements and details of any capital improvements.
- Confirm that there is a capital gains tax liability due.
- Set up a personal government gateway account.
- Create a capital gains tax property account.
- Complete the capital gains tax return and pay the tax liability.
How can Menzies help?
As agents, we can complete and file the real time capital gains tax return on behalf of our clients. We can also help prepare and submit your annual self-assessment tax return for the relevant year.
If you are required to report and pay capital gains tax under the new 60-day reporting deadline, please get in touch with either your Menzies contact or a member of the personal tax team as early as possible, either prior to the completion date or soon after. This will ensure that all the information required can be collated and the 60-day filing and payment deadline can be met. Often, it can take some time to collate all relevant information to prepare the calculations and therefore the sooner the process is started, the less likely any deadlines are missed.
If you have any queries with regards to the on residential property CGT report, please do not hesitate to get in touch with your usual Menzies contact or contact us below: