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Sold a property after 6 April 2020? Don’t get caught out
New rules mean that UK residents with capital gains tax to pay on the sale of UK residential property have to report and pay this to HMRC within 30 days. Penalties for late reports apply from 1 August 2020. Here, we answer some frequently asked questions.
The new rules apply to all UK residents who exchange contracts on the sale of UK residential property on or after 6 April 2020 where there is some capital gains tax to pay on the disposal.
You therefore do not need to make a 30-day report in any the following scenarios:
- The date of exchange was before 6 April 2020 (even if the date of completion falls on or after 6 April 2020).
- There is no capital gains tax to pay. This will most commonly be the case where you are disposing of a property which has been your main residence throughout the entire period of ownership. Full private residence relief can also apply in other circumstances. Alternatively, there may be no capital gains tax to pay because the chargeable gain does not exceed the annual exemption (£12,300 for 2020/21), or there is a capital loss.
- The property is not residential.
- The property is not in the UK.
If you are not resident in the UK and you dispose of any UK land or property, you are already liable to make a report within 30 days. This applies even if there is no capital gains tax to pay.
When do I need to make the report by?
If you are required to make a 30-day report, then the 30-day clock starts from the date of completion, not the date of exchange.
However, if you need to make a 30-day report in respect of a property disposal which completed between 6 April 2020 and 1 July 2020, the deadline is extended to 31 July 2020.
If the 30-day report is not submitted by the deadline, a £100 late-filing penalty will apply. Further penalties will be applicable for a continued delay.
Do I need to report the disposal on a Self Assessment tax return if I have already made a 30-day report?
Only if you need to complete a Self Assessment tax return some other reason.
If there is no other reason that you would need to complete a Self Assessment tax return, you are not obliged to register for Self Assessment in order to report the disposal if you have already made a 30-day report.
I already complete a Self Assessment tax return. Do I still need to make a report?
In almost all cases, if you meet the criteria to make a report, you must do so even if you intend to complete a Self Assessment tax return for the year. There are only two exceptions:
- The 30-day deadline falls after the date on which the Self Assessment tax return is due for the tax year in which the disposal is made. This might be the case if there is an exceptionally long period between exchange and completion.
For example, if contracts are exchanged on 15 March 2021 but the completion does not occur until 15 January 2022. In this case, the disposal would fall in the 2020/21 tax year and the 30-day deadline would normally be 14 February 2022. The deadline for the 2020/21 tax return would be 31 January 2022, which falls before the 30-day deadline. In this case, you should just report the disposal on the Self Assessment tax return by the due date for that return and a separate 30-day report would not be required.
- The 30-day deadline falls after having already reported the disposal on a Self Assessment tax return.
This might happen if, for example, you complete on 30 March 2021 but submit your 2020/21 tax return before 29 April 2021.
In both of the above cases, you should report the gain on a Self Assessment tax return and pay the capital gains tax due by the normal Self Assessment due dates (generally 31 January following the end of the tax year) rather than 30 days after completion.
If you do not need to file a 30-day report on the disposal of UK residential property because you do not meet the criteria to do so in the first place (for example, you have no capital gains tax to pay), then you may still need to report the gain on a Self Assessment tax return if you are completing one. See the latest Capital gains summary notes on GOV.UK for details. This would include the case where you disposed of assets worth more than four times the annual exemption (this equals £49,200 for 2020/21), unless your only disposal in the year is your main home and you qualify for private residence relief on the full amount of the gain.
However, you do not need to register for Self Assessment to report the gain if you have no capital gains tax to pay and no other reason to file a return.
How do I calculate the capital gains tax in year?
Broadly, you will need to make your best estimate of the capital gains tax payable.
You will be able to deduct the annual exemption against any gain arising, as well as losses which have occurred prior to the date of completion. If you need to make a second 30-day report, you should ensure that you do not double count either the annual exemption or any losses.
You will also need to understand the rate of capital gains tax payable. This will depend on your total taxable income in the year.
You should add the taxable gain (that is, after taking account of any available annual exemption and losses) to your estimate of your other total taxable income in the year of disposal:
- If the total is less than the UK income tax higher rate threshold (£50,000 for 2020/21), then the rate of tax payable will be 18%.
- If the total exceeds the UK income tax higher rate threshold by less than the amount of the taxable gain, then the amount of the excess is chargeable at 28% and the rest at 18%.
- Otherwise (if total taxable income is £50,000 or more, for 2020/21), the gain will be chargeable at 28%.
For example, if my annual taxable income in 2020/21 will be £22,000 and I make a taxable gain (after deducting any losses and annual exemption) of £53,000, my total taxable income and gains will be £75,000. £25,000 of the gain will be chargeable at 28% and £28,000 at 18%.
Note that Scottish and Welsh taxpayers should also use the UK income tax rates and bands when working out their capital gains tax.
When do I have to pay the capital gains tax due?
If you need to make a 30-day report, then the capital gains tax will be due by the same date.
How do I make the 30-day report?
You should create a Capital Gains Tax on UK property account under a Government Gateway user ID.
HMRC are expecting taxpayers to use the digital service by default. However, if you are uncomfortable or unable to complete the digital return, you should contact HMRC and explain your circumstances. If appropriate, they may assist you in completing the form over the phone or otherwise they will send you a paper version. The 30-day deadline will still apply, so you should act quickly. Do not necessarily wait until you have sold the property before contacting HMRC.
If HMRC send you a paper form to complete, HMRC should inform you of how and when to pay once they process the form.
In both cases, we recommend completing the necessary steps as soon as possible.
If you need help, see our Getting Help page. If you are on a low income, you can contact one of the tax charities for assistance. Alternatively, you can ask an agent to complete the report for you. If you do this, you will need to provide them with specific authority to do so using a ‘digital handshake’ or, if you are unable to do this, by contacting HMRC. The authority granted by form 64-8 will not be sufficient.
How do I make the payment?
If you have used the Report and Pay Capital Gains Tax on UK property service, you will be given the opportunity to make the payment online or instructions to make the payment by cheque.
What if I need to amend my 30-day report after submitting it?
Currently, you cannot make the amendment online. Instead, you must contact HMRC and explain the amendment that is required.
What if I need to submit another 30-day report in the tax year?
Currently, you are only able to submit one 30-day report online per tax year. If you dispose of a further property and that disposal requires you to submit a further 30-day report, you must contact HMRC.
Where can I find more information?
We suggest you refer to our guidance on Capital gains tax, in particular How and when do I report capital gains to HMRC and pay my CGT bill?.
See also Report and pay Capital Gains Tax on UK Property on GOV.UK.
HMRC have also produced a factsheet.
Contact: Tom Henderson (click here to Contact Us)
(First published: 05/08/20)