UK residential property owners need to check their capital gains tax liability - new 30-day filing requirement

Buying or selling a property is exciting and, of course, a huge event in anyone’s life. However, for it all to go smoothly, it literally pays to be well-informed. It’s hard to believe that it’s already a year since the rules changed around paying tax on residential properties. We are finding that many people involved in property transactions simply aren’t aware of their obligations to pay any Capital Gains Tax (CGT) due within 30 days. This is backed up by figures from HMRC who, in the last six months of 2020 received £1.3M in late filing penalties relating to this, suggesting that the requirement to submit a separate Capital Gains Tax UK Property Disposal Return (CGT Return) on residential properties to HMRC is still not widely known.

Making a CGT return | When does it apply?

The new obligation applies to UK residential property transactions where the date of disposal, which is usually the date of exchange of the property, was on or after 6 April 2020 and where CGT is due. Where no tax is due, because of the many reliefs available for UK residents such as Principal Private Residence (PPR) Relief and the annual exempt amount, UK residents do not need to report transactions. However, non-UK residents continue to need to report transactions even when no tax is due.

HMRC deem UK residential property to include a dwelling with ancillary buildings and any residential elements of mixed units. As a result, where a landlord or homeowner sells a property (including a residential element of any mixed units) and there is some CGT to pay, they must file a separate CGT Return and pay any CGT due within 30 days from the sale completing. If the return is not submitted on time, a £100 late filing penalty applies with additional penalties accruing for continued delays. However, depending on the specific circumstances, a range of reliefs and exemptions may be available to minimise CGT.

According to national statistics published by HMRC, 640,140 residential property transactions took place in the second half of 2020, which means at least 1 in every 48 property sales received a late filing penalty from HMRC.

There are many factors to consider in order to calculate and complete the CGT Return, including determining the time the property was deemed to be occupied as a main residence, and periods not qualifying for PPR Relief during periods of non-occupation, so it is important to start early. Capital gains is currently payable at 18% and 28% depending on the individual’s tax position. An accountant can help, including identifying the extent of garden and grounds qualifying for PPR Relief and capital losses and annual exemptions available which could be set against gains. There are also special tax rules around transfers on divorce, between family members, trusts and deceased estates and it’s also important to understand the reliefs available to owners who have moved out of their house to nursing homes.

CGT reliefs and exemptions | Can you benefit?

We have created a flowchart to assist you in determining whether it is necessary to file a CGT Return within 30 days. However, depending on the specific circumstances, reliefs and exemptions may be available to minimise the CGT payable. Assembling the information required to calculate and complete the CGT Return can take time so it is important to start early.

To download our flowchart, please enter your details in the form below.
If you have any questions regarding CGT, or would like to discuss any other personal tax matters, please get in touch with a member of our Tax Team or your usual Azets contact.

Download our flowchart