Capital Gains Tax Update: you now have 60 days to report gains on UK residential property

Following the Autumn Budget 2021, HWB are pleased that the rule requiring capital gains tax (CGT) on UK residential property to be reported and paid to HMRC within 30 days was increased to 60 days after completion. This measure will come into effect for disposals that completed on or after 27 October 2021.

For many of the 1.2 million disposals of residential property in the UK each year, there will be no CGT liability due to private residence relief. This applies if the residential property is your home and it’s been solely used as your private residence during the time it was owned.

The Budget also clarified that for mixed-use property, only the portion of the gain that is the residential property gain is to be reported and paid.

But many buy-to-let landlords, second homeowners or accidental landlords are in the firing line when it comes to being a target of this tax change.

What is the 60-day rule?

From 27 October 2021, anyone making a taxable gain from the sale of UK residential property will have to report it to HMRC and pay the tax owed within 60 days of the completion date.

In calculating the tax due, you are able to offset capital losses already incurred at this point.  The disposal will also need to be reported on a self-assessment tax return and the tax paid within 60 days will be credited in the tax computation.

How to make a report to HMRC

Gains are declared on HMRC’s online capital gains tax disposal return using the capital gains tax UK property disposal service.  Each individual with a gain will need to register for or login to their government gateway and set up a property account. Once the property account is open, you can enter the information and submit it to HMRC.

Anyone who is digitally excluded can call HMRC for assistance on 0300 200 3300.

Once the report has been made online to HMRC, you can make payment of the capital gains tax calculated. HMRC will send you a payment reference number to use when making the payment to ensure it is allocated correctly.

Who needs to report within 60 days?

Not all residential property disposals will fall within these new reporting requirements.

If you live in the UK, you might need to report and pay capital gains tax when you sell or otherwise dispose of:

• property you’ve not used as your main home
• a holiday home
• a property you’ve let out for people to live in
• an inherited property you’ve not used as your main home

But you will not be required to make a report and make a payment when:

• a legally-binding contract for the sale was made before 27 October 2021
• you qualify for full private residence relief
• the sale/disposal was to a spouse/civil partner
• the gain, including any other chargeable residential property gains in the same tax year, is within your annual exemption (£12,570 in 2021/22)
• you sold the property for a loss
• the property is outside the UK

The above represent the more common situations that could apply, but there are other more complex disposals which can trigger this rule.

If you have disposed of any UK residential property, it’s important to establish quickly whether capital gains tax applies to the disposal and whether it needs to be reported and paid within 60 days.

For tax planning advice and assistance with this new reporting regime, please contact Martin Back on 023 8046 1232.