Since 6 April 2020 UK residents disposing of residential property where a chargeable gain arises need to report and pay any Capital Gains Tax (CGT) due within 30 days of completion of the sale.

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Who is affected?

UK Resident individuals and UK Trusts & Estates are caught within the scope of the reporting requirements. This will include partners who are part of a partnership that dispose of UK property.  Each individual will need to report their share of the gain.

As for Non- UK Residents there is a separate reporting service in which all disposals in UK Land and Property (not just residential property) need to be disclosed, however this briefing does not cover this matter.

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What disposals need to be reported?

You will need to submit a report for any gain made on UK residential property from the 6 April 2020 where a CGT liability arises.

The definition of residential property is one that is suitable for use as a dwelling.

There are cases where a property can have both residential and commercial use, for example a corner shop with a flat above. For these situations only the residential element of the gain will need to be reported.

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When is the report not required?

If a loss is made or the gain made is covered by either a relief or by the annual exemption no report is required. A report would not be required for transfers of property between spouses and civil partners as these are deemed to take place at nil gain nil loss.

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Principal private residence relief

Generally speaking, where a property is your main residence throughout the whole period of ownership any gain made will be exempt due to principal private residence relief. The exemption may not apply in full if:

  • The property was not your main residence throughout the period of ownership
  • Part of the property has been used exclusively for business purposes during the period of ownership
  • The land of the property exceeds the permitted area for the relief

Where a relief only partially applies and a taxable gain is made, a 30 day CGT report will be required.

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How to report

The gains made will need to be reported online via a government gateway account which the taxpayer or trustee will need to create. Once the account is created you can then report the disposal yourself or authorise an agent to act on your behalf and prepare the report.

A paper return can be requested from HM Revenue and Customs if you are unable to use the online service for any reason.

As the name suggest the Capital Gains report is due for filing within 30 days of completion along with any CGT due for payment. If the return and payment are late interest and penalties may arise.

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Calculating the gain

Within the report you need to prepare a computation of the gain made showing your share of the proceeds less any allowable costs such as purchase price, legal fees, capital improvements etc. You may need to seek guidance from your accountant or tax advisor on which expenses can be deducted.

Once the computation has been prepared you can then look at offsetting the annual exemption which is £12,300 for the 2021-22 tax year and any available capital losses. After taking into account the annual exemption and utilised losses, you will arrive at the taxable gain. The gain will be taxed at either 18% and/or 28% depending on where the gain falls within your tax bands. To determine at what rate the gain is taxed at when you complete the report you will be asked what your anticipated income for the tax year will be.

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Self Assessment Tax Return

On the basis the CGT is initially calculated using your estimated income for the tax year and will not take into gains/losses that are made post disposal you may need to prepare a self-assessment tax return once the tax year is over to be able to confirm the correct tax position.

Within the capital gains tax pages, you will need to include the property disposal along with any other gains and losses made in the year.

If you have not prepared a tax return previously and you need to complete one you will need to register for self assessment by the 5th October following the tax year of disposal. The tax return is due for filing by the 31st January following the end of the tax year.

If you have any queries with regards to the 30 day CGT on residential property report, please do not hesitate to get in touch with your usual Menzies contact or you can contact a member of the team on:

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