Capital Gains Tax on UK property returns and tax payment
60 days to act
From 6 April 2020, UK residents (individuals, partnerships, Trusts and Estates) disposing of UK residential property may be required to report details of the disposal to HMRC on an in-year Capital Gains Tax return. The return filing together with payment of any Capital Gains Tax (CGT) due to HMRC must be completed within 60 days of the sale completion date. For disposals prior to 27 October 2021, these deadlines were 30 days following sale completion.
For UK residents, a filing requirement only arises where a CGT liability is payable in respect of the disposal. This same reporting requirement exists for non-resident taxpayers. However, for non-residents, all UK land & property disposals are reportable to HMRC within the 60 days deadline, regardless of whether any UK CGT liability arises on the disposal.
Where the 60 days filing deadline is not met, HMRC will impose late filing penalties. An initial late filing penalty of £100 will be levied (per return, per person), with a penalty equal to 5% of the unpaid tax due where the return is more than six months late. A further 5% penalty arises where the return remains outstanding for more than 12 months. With tax-geared penalties, missing the filing deadline can become a very costly mistake. In addition, any CGT liability not paid in full by the 60 days deadline will be subject to late payment interest, currently at 6.75% per annum.
We receive many enquiries from new clients who are not aware of these tax filing requirements and we are therefore keen to raise an awareness of this to our existing client base, as well as amongst other professionals within our network.
The rules governing how to calculate the taxable gain on disposal can be complicated, with various reliefs and elections available to minimise tax liabilities, where appropriate. There can also be some relatively straightforward pre-disposal tax planning strategies to mitigate your CGT liability, such as spousal transfers prior to disposal, but advice should be taken to ensure such planning is appropriate for your circumstances.
If you need advice regarding disposing of, or are considering disposing of UK land and property and would like to understand the UK tax implications, please get in touch with Mark Stemp.
Watch Mark’s recent webinar in conjunction with Rightmove on the latest CGT rules on the sale of a residential property.