Selling or transferring a UK property? Make sure you know the CGT rules.

You need to let HMRC know and pay any CGT due.

UK tax residents who sell/transfer UK residential property are required to report and pay any Capital Gains Tax (CGT) due within 60 days of the date of completion if it was on or after 27 October 2021.

Sales or transfers completed before 27 October 2021

If the completion date was between 6 April 2020 and 26 October 2021 the you are required to report and pay any Capital Gains Tax (CGT) within 30 days of the date of completion.

If you sold a property before 6 April 2020 gains must be reported in your Self Assessment tax return for the tax year following date of the sale.

What counts as a sale or transfer?

Included is a sale to a third party at market value; a transfer to a relative; or even a sale or transfer of part of the property.

How to calculate the gain and tax

In broad terms, a gain is calculated by taking your sale proceeds, and deducting:

The purchase price

Costs of selling the property (estate agent’s fees and solicitors’ fees., etc)

Costs of buying the property (including Stamp Duty and solicitors’ fees., etc )

Enhancement costs (costs of building extensions., etc)

The gain is further reduced if the property owner qualifies for Principle Private Residence Relief (PPRR), and Lettings Relief (subject to recent change with additional conditions to meet). If the property is jointly owned, each individual’s capital gain will be base on their individual circumstances.

The capital gain calculated is reduced by the annual CGT exemption applicable at the time and which is available to each individual.

If you sell the property at under market value or have gifted the property, the true market value is deemed proceeds to be used in the calculation.

The rate of CGT payable is up to 28% depending on other taxable income.

How to Report

Tax payers will have to register for HMRC’s digital service designed to report CGT on UK residential property. You must do this even if you use a tax adviser to report the gain on your behalf.

Reporting your CGT within 60 days will, in some circumstances be a best estimate of your CGT liability based on your circumstances at the time.  HMRC have a system in place to allow adjustments so that the correct tax is paid.

If you need to submit Self Assessment tax returns

If you are already reporting through self assessment, you will need to report the gain again, along with other gains and income before the usual deadlines, showing the tax already paid. The self assessment effectively irons out any over or underpayment made due to changes in your circumstances in the tax year.

If you are not within the Self Assessment tax regime

If you are not within the self assessment tax regime, you have up to 1 year after the initial submission date to submit an amended CGT Return through the digital service. HMRC will treat any declaration you make as final on the first anniversary of the initial submission.

When does the 60 day rule not apply?

 The 60 day rule will not apply in the following cases:

1. If you have calculated your gain to be less than the annual exemption applicable at the time, there is no tax to pay so no reporting is required
2. If you have losses from previous years that can be carried forward and offset against the property gain to bring it down to below the annual exemption.
3. If you have crystallised capital losses in the same tax year, but prior to the disposal of the residential property, and those losses can bring the gains to below the annual exemption.

If the transfer is to your spouse, civil partner or to a charity special rules apply

We suggest you seek advice from a tax adviser on the above.

Penalties

HMRC will apply penalties if you miss the reporting deadline or deliberately withhold information required to enable them to calculate the tax due.

What should you do next?

It is recommended that you contact your tax adviser as soon as you have decided to sell/transfer the property, as you are likely to know most of the amounts required for the CGT calculation, including a fair idea of the proceeds you may receive. This will help ensure that the deadline is not missed or overlooked.

If you need assistance with the calculation and reporting of the sale or transfer of a UK residential property or any related matter please contact us

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