Residential property Capital Gains Tax 60-day reporting: Are you on top of it?

Three years ago, the government changed the rules on how Capital Gains Tax on residential property should be reported and paid, around the same time that they introduced the new HMRC digital service. The updates introduced a 60-day deadline for reporting and paying the CGT due after sale, as well as the requirement to use the new platform for filing.

This article outlines the 60-day CGT property return guidance that applies to the sale of a residential property by individuals, joint owners, partners in a general partnership or LLP or trustees. Before you read on, it’s important to note that there are slightly different rules for non-UK residents and this guidance relates to UK residents only.

The guidance applies to all residential properties; buy-to-let residential, holiday/second homes, HMOs and even residential properties that you may have lived in ‘partly’ as your primary residence, but never fully as your primary residence.

And finally, when it comes to the disposal itself, this guidance applies to any sale, gift, grant of lease, transfer via deed, declaration of trust and transfer by any other means. So it’s safe to say that the CGT 60-day rule applies to the vast majority of UK residential property sales.

So what’s not covered under the 60-day rule? If your property is a commercial asset, if it’s overseas, disposed of by a company, a neutral transfer between spouses, disposed of at a loss, or within the annual CGT exemption of £12,300, then you shouldn’t need to worry about the 60-day rule, although we would always recommend seeking professional advice to confirm your position.

More about the deadline

The deadline will be set by the date on which you complete. As per usual, failure to meet this deadline will incur a penalty from HMRC as well as calculated interest. 

The rate for CGT on residential properties depends on your income. If you’re a basic rate taxpayer (total income of £50,270), the CGT rate is set at 18%. For higher and additional taxpayer rates, the CGT rate jumps to 28%.

Sometimes you may not be able to estimate your tax bracket or income during the time when the 60-day rule falls, so in this case you’ll need to make a best guess, and do make sure this is done carefully as you don’t want to get penalised for an inaccurate return.

Answers to typical FAQs

Will I need to file a self-assessment if I declare my CGT in line with the 60-day rules?

No, not if you have no other reason to file one other than the sale of your property. But, if you are required to file your own self-assessment for any other reason (eg: self-employment), then you must report the CG on this return too.

What if the CGT that I report turns out to be too high and I’ve overpaid?

As is typical with HMRC, you will be sent a repayment. Or, the amount could be offset against your self-assessment liability if you’re filing one for other purposes. But, this is where due diligence is important on your part. HMRC will not recognise accidental overpayments. It’s on you to uncover your own errors and report them to HMRC, either yourself or via an accountant or tax professional. 

Is the new digital system easy to use?

The updated digital system requires you to set up a UK Property Account via your existing Government Gateway login. This means that you have to set up a personal tax account before you can register for the UK Property Account. The updated digital system requires you to set up a UK Property Account or use your existing Government Gateway login. The on-screen process is easy to follow and if all goes well, you’ll be issued a 15-digit reference, which you must share with your accountant or tax professional.

What information do I need?

It’s all fairly straightforward. Obviously, the address of the property and all key purchase details such as date of purchase, sale exchange and sale completion. You’ll also need to provide the value on purchase and value on sale, as well as the cost of any improvements you made to the property during your ownership.

As with most things when it comes to tax, HMRC and Capital Gains, we highly recommend that you consult an accountant. Whilst the process has become somewhat easier, the penalties, should you make a mistake, remain harsh, so it really wouldn’t hurt to work with a tax professional before submitting your 60-day return.

If you have a Capital Gain to report and would like help with navigating the process, then don’t hesitate to get in touch with our tax team.

If you are a non-UK resident selling a residential property in the UK, then please do contact us to talk through your requirements.