Changes to the reporting of Capital Gains on UK property sales

From 6th April 2020 the way in which taxpayers are to disclose gains on the disposal of UK residential properties has changed. Upon completion of the sale of a residential property there will be a 30-day window to report the disposal and pay the associated capital gains tax due to HMRC, through the submission of a “payment on account return”.

The need to disclose a gain to HMRC is most likely to arise from the sale of a rental property. However, disclosures may also be required upon the sale of holiday homes; properties owned by the taxpayer which have not been used as a main residence or are no longer used as a main residence; and inherited properties not considered to be the owner’s main residence. These rules may also apply to trustees who dispose of residential property held in trust.

A disclosure will only be required in cases where the gain made on a UK residential property disposal exceeds the capital gains annual exemption, if this has not already been used. The current annual exemption for the 2020/21 tax year is £12,300. Within the disclosure the taxpayer will need to estimate their income for the tax year, as capital gains above the annual exemption are chargeable to CGT at 18% where they fall within an individual’s otherwise unused basic rate band, and 28% when they fall within the higher and additional tax rate bands.

Where a Self-Assessment tax return is completed by the taxpayer, the gain disclosed within the “payment on account return” must also be included within the tax return and the final CGT position will be determined at this date.

If the taxpayer fails to inform HMRC of a disposal that meets the reporting requirements within 30 days of completion, regardless of whether they are within the Self-Assessment regime or not, penalties will be imposed along with interest charges on the gain.

If you require any further information regarding the reporting of capital gains on the disposal of UK residential properties, or require assistance with reporting a gain, please get in touch with us.