30 day time limit for reporting capital gains on the disposal of residential properties
From 6 April 2020, HMRC have introduced new rules requiring that any gains on the disposal of UK residential property are reported to HMRC and tax paid within 30 days of sale.
Who does this effect?
As the disposal of a person’s main residence is normally exempt form capital gains tax, the new rules are most likely to impact those who own more than one property. This will include those who hold property as investments (such as landlords) or those who have second homes, such as holiday homes.
What does it mean?
Traditionally capital gains tax has been due on 31 January following the end of the tax year. For example, someone who sold a property on 31 March 2020 will not have to report and pay the tax until 31 January 2021. The new rules mean that if a property is sold 6 days later on 6 April 2020, the gain must be reported, and tax paid by 6 May 2020. This raises 2 major concerns:
- Cashflow – the tax must be paid significantly earlier than under the old rules.
- Administration – 30 days is quite a short period of time to dig out all of your information regarding the original acquisition of the property and to register for the reporting service and complete the necessary information. You will also need your Gateway ID if you have one. If not, you can set up your Gateway ID as part of the registration process.
What if I miss my deadline?
Penalties will be charged for late reporting of gains and interest will be charged on late payment.
Do I still need to report my gain in my self-assessment tax return?
As well as reporting the gain within 30 days, you will also include the detail in your capital gains pages of your self-assessment.
The capital gains tax due may increase if, for example, you estimated that tax would be due at basic rate of 18% but your other income was higher than expected such that some of the gain became taxable at higher rate of 28%.
When to ask for help
Speak to us if:
- You are unsure whether you need to report a gain – whether a gain needs to be reported will depend on who the property was transferred to, whether any reliefs were available and whether an overall ‘profit’ (gain) has been made.
- You are unsure how to calculate a gain and need advice to ensure all costs are considered to minimise your tax bill
- You are considering selling a residential property – tax planning opportunities have often passed if you don’t speak to an advisor before the sale takes place. Contact us early and we can help you to minimise your tax bill.
CHN Consulting offer a free 30 minute consultation for new clients: https://chnconsulting.co.uk/contact-us/