Capital Gains Tax (CGT) rules for house sales changed last April. Developers, landlords and those selling second homes need to be aware or they will face penalties.
Anyone selling a residential property where CGT is due has to report and pay within 30 days of the sale. Previously is was 10-22 months. The rules are applicable to those homes sold after 6 April, 2020.
The Covid-19 pandemic forced the government to introduce a three-month adjustment period, but now that time has expired. All CGT reports and payments must be made within the period or penalties will be enforced, the government warns.
Transactions completed after 1 July, 2020 onwards receive a late-filing penalty if they are not reported within 30 calendar days. Also, interest will accrue if tax remains unpaid after the 30-day period.
What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.
The new rules affect landlords or property developers selling on part of their residential property portfolio. It also affects UK residents selling a residential property that is not their primary home.
Anyone selling a UK property that is their main residence will not be affected.
Customers will continue to complete their tax return as now for any other Capital Gains Tax declarations in the future. They will pay tax on any profit, above their tax-free allowance, when they sell most personal possessions worth over £6,000 – apart from their car – their main home if they have let it out or used it for business, shares and business assets.
What if I don’t pay?
There will be penalties and interest charged for failure to do so. HMRC has been communicating the change in rules for several months so it will be harder to successfully appeal should you miss any deadlines.
How do I pay?
You should create a CGT on UK property account under a Government Gateway user ID. HMRC is 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.You will be given the opportunity to make the payment online or instructions to make the payment by cheque.
It’s also worth noting that 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.
If you are a landlord, developer or are selling a second home and need advice, contact us today.