Over the past few years, there have been a few changes to Capital Gains Tax relating to the sale of residential property which we have found several clients have been impacted by, so we thought we’d share this with you. 
 
What are the changes? 
 
There have been two changes that have come into effect: 
 
1) New rules were introduced on 6th April 2020 requiring taxpayers to report the disposal of a UK residential property within 30 days of the sale and pay the estimated Capital Gains Tax (CGT). 
 
2) The Autumn Budget 2021 amended the deadline from 30 days to 60 days. 
 
Who and what do these new rules apply to? 
 
These rules apply to UK tax residents who are residential property owners that are: 
 
• Individuals 
• Personal representatives 
• Trustees 
• Joint owners of a property 
• Partnerships and Limited Liability Partnerships 
 
The rules apply to residential properties where there is a direct interest only, such as the sale or gifting of a house. The property must be classified as residential and can include any that are in the process of being constructed or adapted for residential use. If the property has mixed-use, only the residential part of the gain needs to be reported. 
 
The disposable of shares in a company that holds UK residential properties are classified as indirect interest and are not included under these rules. 
 
You would typically need to report a sale if the property was a rental property, holiday home or home that you have never lived in or lived in for only part of the ownership. If you have lived in the property for the last 60 days as your main residence and you have resided in it throughout the ownership, then it is exempt from CGT. 
 
There are however some other exceptions where you will not need to report it as there is no tax on the disposal, this can be the case when: 
 
• There is no gain or loss from a transfer of ownership between spouses or civil partners 
• There is no gain as the property is sold with no gain or at a loss 
• The gain from the disposal is fully covered by exemptions such as the Private Residence Relief or annual exemption 
 
Other exemption reasons include: 
 
• A grant of a lease is made on commercial terms for no premium to someone unconnected 
• The disposal is made by a charity or a pension scheme investment 
• Where the disposable is chargeable to income tax 
 
How to report the disposal to HMRC 
 
You will need to log into the Government Gateway to report the sale of the residential property and the subsequent CGT. You do this by registering for a Capital Gains Tax on a UK Property account which you can do yourself or through us. This needs to be done within 60 days of the property disposal which classed is the completion date. After you submit the return, you will receive a payment reference to make a payment on the estimated CGT from the disposal. Late filing penalties can be charged along with interest on any unpaid tax. 
 
If you complete a self-assessment tax return, you will also need to report the disposal of the property on this. If you complete a self-assessment tax return during the 60 day period which includes the disposal of the property you may be exempt from reporting it separately as you have already informed them of it. 
 
How to calculate CGT 
 
When you report the disposal, you will need to calculate the estimated tax owed which will need to be paid within the 60 days from disposal. You will need to calculate the profit made on the property between the purchase price and the sale price. There are certain deductions that you can make such as the annual exemption which is currently £12,300 for individuals up to and including the 2025-26 tax year. 
 
The final tax position can be fully calculated on the self-assessment tax return where other factors can be included such as losses realised after the disposal. The CGT estimate is handled as a payment on the self-assessment liability and any overpaid tax will be adjusted on the completion of the self-assessment return. If there was an underestimation of CGT tax, interest may be charged on the amount underpaid. 
 
If you are an existing client and would like any advice on CGT or support on completing a return, please get in touch. 
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