Capital Gains Tax 30/60 day reporting requirement

UK Residents

Since April 2020, UK residents disposing of UK residential property must report taxable capital gains to HMRC via a separate standalone ‘Capital Gains Tax on UK Property Account’. For transactions which completed prior to 27th October 2021, the deadline for submission is 30 days from completion. For transactions completing from this date, the deadline has been extended to 60 days from completion.

The estimated tax payable is also due within 30/60 days of the sale completion. If no tax is expected to be due, then 30/60-day report is not required. However, the disposal may need to be reported via an annual Tax Return (see below).

It should be noted that the residential element of any ‘mixed’ transaction is also subject to these rules, but the non-residential aspect is not.

Unless a taxpayer is ‘digitally excluded’ the UK Property Account must be delivered online to HMRC via the UK Government Gateway platform. Accountants and agents can be authorised to submit a Property Account on behalf of their clients.

Non-UK Residents

For non-UK residents a similar reporting requirement applies. However, there are two key differences:

  • Gains on all UK land and property sales must be reported (not just residential property)
  • The gain must be reported to HMRC irrespective of whether a tax liability arises

Self-Assessment Tax Returns

Where a taxable gain arises, details of the gain must also be reported on an annual Tax Return. This will be due by the following 31st January after the tax year in which the gain arose e.g., 31st January 2023 for a disposal in the tax year ending 5th April 2022. The tax due on the gain (and any other self-assessment liability) will also become due at this point. This liability will be reduced by the tax already paid on submission of a UK Property Account.

For capital gains, which do not create a tax liability, the gain will still be reportable via an annual self-assessment Tax Return unless the transaction is ‘small’ – gives rise to no tax and the proceeds on disposal do not exceed four times the annual exemption.

Executors, Personal representatives, and Trustees

These groups of individuals all fall within the scope of these rules and must also consider if they should report capital gains within 30/60-days.

It is important to bear these reporting requirements in mind as there can be significant penalties for non-compliance.

Capital Gains Tax rates

For residential property, the Capital Gains Tax rates are 18% and 28%. The rate payable is linked to an individual’s taxable income and whether the gain falls within the basic or higher rate tax band for income tax.

Ways to reduce your CGT liability

Individuals are entitled to an annual tax-free allowance (currently £12,300). For the sale of residential property, a full exemption may be available if you have used the property as your main residence throughout the period of ownership. However, full relief may not be available where all or part of the property has been used for a non-qualifying purpose. This could be because the property was rented to a third party, used for a business or the property was not occupied as a main residence.

Certain periods of non-occupation can be considered deemed occupation and thus not taxable. However, the rules are complex, and the facts of each case needs to be considered carefully.

The claiming of ‘Main Residence Relief’ (sometimes Private Residence Relief/Principal Private Residence Relief) does also extend to gardens and grounds. However, care must be taken because the relief only covers an area of up to half a hectare (just over an acre). For an area above this size, the relief is not automatic, and a claim (usually via a Tax Return) must be made to HMRC for relief to apply on a larger area.

Further tax planning opportunities may be available to mitigate or defer a CGT liability and it is important to consider these before a sale is made. These include, but are not limited to:

  • Inter-spouse transfers;
  • Main residence election planning
  • Tax deferral investments – Enterprise Investment Scheme (EIS)
  • Tax planning to reduce taxable income

Why use an accountant to calculate your CGT liability?

Capital gains tax is one of several considerations that needs to be made when disposing of an asset, particularly if it should be part of a wider plan for, say, inheritance tax, or income tax as there are various traps for the unwary.

The rules on capital gains tax can be complex and dealing with HMRC can be a challenging experience.

By using an accountant, you can ensure you will receive a fully advised service and can be confident that the gain will be calculated correctly and all claims or elections for available tax reliefs are made in the appropriate manner.

We are highly experienced in dealing with HMRC and can make the process as smooth as possible.

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How we have saved our clients on their CGT liability

  • Transfer of property between spouses to make use of annual exemptions/lower tax rates – savings of ‘000s;
  • Successful claim for Main Residence Relief where grounds were in excess of ½ hectare – tax saving around £25k
  • Investment in Enterprise Investment Scheme (EIS) to defer capital gains tax liability (via a financial advisor)
  • Advising on the timing of certain disposals by those becoming non-resident, to avoid UK capital gains tax in its entirety (also requires specialist overseas advice)

Next steps

If you have made a capital disposal and would like our assistance to report a gain, then please contact us using the form or by contacting one of our offices directly. If you are considering making a disposal in the future, then we are available to advise you on tax planning options that could reduce your tax liability.

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