*Warning: tax regulation talk to follow!* Don’t worry, we know tax rules and regs can be a tricky topic, but an important one. We’ll keep this as simple as possible for those of you who it affects. If you’re planning on selling UK land or property that isn’t your home, you need to be aware of some changes that have recently been made to Capital Gains Tax.
Quick refresher on Capital Gains:
- Capital Gains Tax (CGT) is a tax you pay on the profit you make when you sell or ‘dispose’ of a property that isn’t your home.
- ‘Disposing’ of a property can mean: selling it, giving it away as a gift, transferring it to someone else, getting compensation for it if it has been destroyed.
- The property may be a second home, buy-to-let property, business property or inherited property, for example.
- CGT is only charged on the gains you make, not on the full amount you sold the property for.
CGT must now be reported and paid within 60 days of completion
Though property sales will have certainly slowed down a little at the moment, it’s important to bear these new rules in mind if you have plans to sell. Following the Finance Act 2019, new rules on reporting CGT came into effect in 2020, which were softened a bit a year later. Here are the key points:
- If you’re a UK taxpayer and you make a taxable gain following the sale of a UK residential property, you will have to report it using the new ‘real time’ Capital Gains Tax service within 60 days following the completion date.
- The ‘completion date’ refers to the moving day – the date the property is actually transferred in ownership from the buyer to the seller, not to be confused with the ‘exchange’ date where contracts are exchanged.
What if I’m a Non-UK resident taxpayer?
You must report and pay non-resident Capital Gains Tax if you sell or dispose of UK property or land if you are a:
- non-resident individual
- personal representative of a non-resident who has died
- non-resident who’s in a partnership
- non-resident landlord
- non-resident trustee
- UK resident meeting split year conditions and the disposal is made in the overseas part of the tax year.
What if I don’t think any tax is due on the property?
If you think that your total taxable gain is less than your Capital Gains Tax allowance then you won’t have to pay tax. However you will still need to report the gain in your tax return if you’re registered for Self Assessment, and if the total amount you sold the assets for was more than 4 times your allowance. The Capital Gains Tax allowance dropped to only £6,000 from April 2023, so that is quite likely! Make sure that you calculate the gain carefully and keep the records just in case.
If you want to complete your return yourself, here’s what to do
If you’re going to access the ‘real time’ Capital Gains Tax service yourself, here’s what you’ll need to do:
- Go to this link and click ‘Start’ to report your capital gain
- Once you’ve clicked ‘Start’ you’ll need your Government Gateway user ID and password. If you don’t have this already, you’ll be instructed to set it up and you’ll need to wait for your password to arrive from HMRC. This will delay the process, so get started as soon as possible when you know you have sold your property
- Once you’ve put your details in, you’ll be texted an access code
- Enter the access code you’re given, and you’ll be taken through to the Capital Gains Tax service page
- Go to ‘Create an account’. This will generate a 12 digit account number for you
- Complete the requested information. You will need to upload PDF or JPG files showing how you calculated the capital gain and the Capital Gains Tax
- After you have reported the gain, HMRC will send you a letter or an email with a payment reference number, and will tell you how to pay
- Don’t pay the tax owed until you have received your payment reference number.
We can save you stress (and might save you tax!) by completing the calculations and return on your behalf
If you’d rather have us calculate the capital gain and report it for you, we can take over from you once you have got your Government Gateway user ID and password, and you have created a Capital Gains Tax on UK property account. Getting some support will help you feel confident that you’ve reported everything accurately and got it all sorted in the required time frame. We will also be able to advise you on what expenses you can offset against the profit and help keep that tax bill as low as (legitimately) possible. The only details we’ll need to act for you are:
- Your Capital Gains Tax on UK property account number
- Your home postcode or country of residence (if non-resident) – these must match your Capital Gains Tax on UK property account details
- We will then use those details to send you a link to authorise us to act on your behalf.
Once we are able to act on your behalf we will need details on the disposal of your property:
- The address and postcode
- Date you bought the property
- Exchange and completion date when you sold your property
- Original cost, and the sales price
- Any associated purchase or sale costs, and information on money you spent to make improvements to the property
- Dates when you lived in the property, if that was the case.
We may need further information as we work through the calculation.
Save yourself the stress and get everything ready ahead of time
Once you get to the date of completion, we recommend getting your tax return sorted and out of the way. If you leave it to one side, you may find that time runs away with you and you get hit with a penalty or interest charge. We don’t want that for you! So please do ask for help and support where you need it. Pop a note in our form here if you want to chat anything through.