Please note this article has been updated following the announcements in the 27th October Autumn Budget where the 30-day CGT was increased to 60-day CGT
Regardless of the ebbs and flows of the pandemic, Brexit and the economy, there has been one constant, that house prices are rising.
None of us knows what the future holds, but we have seen a number of our landlord clients in recent months taking advantage of the market and selling. As a consequence we have been completing 60 day CGT returns on their behalf.
Q: What is a 60 day CGT return?
If this last sentence leaves you asking “what is a 60 day CGT return?” then you are not alone. Unfortunately, awareness of the requirement, introduced in April 2020, to make a tax return and pay an estimate of capital gains tax due within 30 days of selling UK residential property is poor. HMRC initially did not levy penalties on those who failed to make returns or did so late, but they are doing so now.
Q: So what is the requirement?
Since April 2020, unless an exemption applies, anyone selling UK residential property has needed to file a tax return and pay an estimate of the capital gains tax due within 30 days of sale. UK residential property includes anything which could be used as a home including unoccupied properties, holiday homes, buy-to-lets and the residential element of mixed-use properties.
Q: Did I think this just applied to non-residents?
Until April 2020 it was just non-residents who had to pay capital gains tax within 30 days of selling a property, but this requirement now applies to both UK and non-UK resident individuals.
Q: What are the exemptions?
No 30-day return is required if there is no tax to pay, most commonly because:
- The sale is of your only or main home, and the property has been your only or main home throughout the period of ownership.
- It is a transfer of a property between spouses
- The property is being sold at a loss
- The gain is covered by the annual exemption, currently £12,300.
Q: Can I not just report it on my Self Assessment tax return?
No, even if an individual is within Self Assessment they must still complete a 60 day CGT return. The disposal has to go on their tax return too. Often the amount of capital gains tax due on disposal cannot be calculated exactly until after the end of the tax year, so including the disposal on the Self Assessment tax return allows calculations to be corrected.
Q: How do I complete the return?
Solicitors very seldom complete these returns as part of a property transaction. Individuals can complete the return themselves through the gov.uk website or can appoint their accountant to do so. We have completed a large number of returns and would stress that it is important to start work quickly as even when the actual capital gains tax calculation itself is simple, it can take some time to work through the HMRC administrative requirements to set up the return and appoint an accountant to complete it on your behalf.
Q: I am already late. What do I do?
If you have disposed of a property for which a return is due and are already beyond the 60-day filing deadline, our advice would be to submit the 60-day CGT return now rather than waiting to include it on your annual Self Assessment tax return. HMRC are now levying penalties for late filing, and these increase the longer the return is overdue. And in addition, paying an estimate of the tax due reduces the amount of interest that HMRC will charge.