Have you reported in 30 days? Gains on UK residential property

Last year, a new rule requiring capital gains tax (CGT) on UK residential property to be reported and paid to HMRC within 30 days was introduced.

This ushered in another change to tax rules affecting residential landlords, which seeks to collect this tax quicker.

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.

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 30-day rule?

From 6 April 2020, 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 30 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 30 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 30 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 6 April 2020
• 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 tax-free allowance (£12,300 in 2020/21)
• 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.

Due to the coronavirus pandemic, HMRC did not issue late penalties to any transactions completed between 6 April and 30 June 2020, provided the gain was reported and any tax due paid by 31 July 2020. However, any transactions after this date will be subject to late-filing penalties and interest.

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 30 days.

For tax planning advice and assistance with this new reporting regime, please contact Helen Spalding on 023 8046 1234