30-day Capital Gains Tax Reporting on Property Sales

From last April (6th April 2020), the government made a major change to Capital Gains Tax, whereby a UK resident who sells a residential property in the UK will have 30 days to tell HMRC and pay any Capital Gains Tax (CGT) owed.

HMRC introduced a new online service to allow taxpayers to report and pay any CGT owed.

A CGT report and accompanying payment of tax may be required where the taxpayer sells or otherwise dispose of:

- a property that they have not used as their main home;
- a holiday home;
- a property which has been let out for people to live in;
- a property that has been inherited and not used as a main home.

There is no requirement to make a report or make a payment of tax when:

- a legally binding contract for the sale was made before 6th April 2020;
- the individual satisfies the test for Private Residence Relief (generally a main residence);
- the sale was made to a spouse or civil partner;
- the gains (including any other chargeable residential property gains in the same tax year) are within the tax free allowance known as the annual exempt amount (£12,300 in 2021/22);
- the property is sold for a loss; or
- the property is outside the UK.

Subject to certain exceptions, where there has been a disposal of a residential property, payment on account of the CGT will be due on the filing date for the return, which is generally within 30 days of the day after the date the property sale is completed.

The payment on account required is the amount of CGT notionally chargeable at the filing date. This is the tax that would be due if, under the normal rules for calculating chargeable gains for a tax year, the tax year ended at the time the disposal is completed.

In calculating the amount, any unused allowable losses for capital gains purposes incurred by the time the disposal is completed can be used. Available reliefs and the annual exempt amount are applied in the normal way.

The amount of CGT payable on account is the amount after applying the applicable rate of tax to the net gain.

Since the 30-day payment window can make it difficult for some people to provide exact figures, HMRC allow for certain estimates and assumptions to be made. The taxpayer can make a correction once the exact figures are known, most probably when submitting their self-assessment tax return.

If the resulting amount is higher than the amount previously paid, the difference becomes payable to HMRC and interest may be due. If the amount is lower, the difference becomes repayable along with repayment interest from HMRC.

CGT Reporting Deadline

Capital gains tax (CGT) on disposals of UK residential property between 6 April and 1 July 2020 had to be reported to HMRC by 31 July to avoid a penalty.

Finance Act 2019 made certain changes regarding payment of CGT, which took effect from April 2020 and broadly align the position of UK residents and non-UK residents. From 6 April 2020, a UK resident who sells a residential property in the UK will have 30 days to tell HMRC and pay any CGT owed. Failure to notify HMRC within 30 days of completing a sale may result in penalty and interest charges.

However, in response to the COVID-19 pandemic the government extended the reporting deadline so that no late filing penalty will be charged for any transactions completed between 6 April 2020 and 1 July 2020 which were reported by 31 July 2020.

The extended deadline applies only to UK resident taxpayers for whom the requirement is new - non-residents have to file within 30 days of completion.

The requirement to pay any CGT due within 30 days of completion was not deferred and interest will be charged on any tax not paid within 30 days of completion.

UK residents are required to report gains on UK residential property only where tax is due.

A CGT report and accompanying payment of tax may be required where the taxpayers sells or otherwise disposes of:

- a property that they have not used as their main home;
- a holiday home;
- a property which has been let out for people to live in;
- a property that has been inherited and not used as a main home.

There is no requirement to make a report make a payment of tax when:

- a legally binding contract for the sale was made before 6 April 2020;
- the individual satisfies the for Private Residence Relief (generally a main residence);
- the sale was made to a spouse or civil partner;
- the gains (including any other chargeable residential property gains in the same tax year) are within the tax free allowance known as the annual exempt amount (£12,300 in 2020/21);
- the property is sold for a loss; or
- the property is outside the UK.

HMRC have launched a new online service that allows taxpayers to report and pay any CGT owed: https://www.tax.service.gov.uk/capital-gains-tax-uk-property/start/report-pay-capital-gains-tax-uk-property