If you’ve sold a UK residential property during the past couple of years, you’ll need to complete a Capital Gains Tax return. This is important for a number of reasons. Firstly, it’s a legal obligation and if you fail to do it, you could be liable for a penalty.
Filing a Capital Gains Tax return
If you have sold a UK property, you may need to report and pay Capital Gains Tax (CGT) within 60 days of selling it.
The UK government introduced reporting requirements for residential property sales on 6 April 2020. For disposals that occur before this date, you will need to file a self-assessment return to report the gain.
The new rules have not changed the rate of CGT that applies to residential property. Basic rate taxpayers will pay 18%, while higher or additional rate taxpayers will pay 28%. A gain below the annual exempt amount will not be liable for CGT.
To report and pay Capital Gains Tax on UK property, you will need to register with HMRC and use its online service. You can do this via the UK Property Accounts portal.
Reporting and paying is a fast and convenient process. However, you should ensure you complete the process correctly. If you fail to complete it by the deadline, you could be charged a late filing penalty.
Paying the tax
Capital Gains Tax is a tax that is imposed on profits derived from the sale of capital assets such as property. The amount of capital gains tax you are required to pay on your UK property depends on the type of property and your personal circumstances.
There are several ways to reduce your Capital Gains Tax on UK property. For example, you can claim a deduction for estate agent fees, stamp duty, and renovation costs. You also can claim letting relief. However, there are rules you should be aware of.
If you are an individual, you will need to complete a residential property return and pay the appropriate tax. This tax is not due on the full value of the sale. It will be based on the profit you make, after deductions.
Non-UK residents
If you are a non-UK resident and you own a UK property, you may be liable to pay Capital Gains Tax (CGT). CGT will be calculated on your gains from the sale of your main home, second home or rental property.
Non-UK residents must report the disposal of their assets on a Non-Resident Capital Gains Tax (NRCGT) return. To complete the NRCGT return, non-UK residents must first confirm that they are not a UK resident. They must then calculate their gains or losses and include this information on their return.
When you dispose of an asset, the gain is generally taxed at the appropriate rate. This charge is calculated after taking into account your tax-free allowances.
The amount of chargeable gains can be either time apportioned or whole gain or loss over a period of ownership. However, you will need to pay your CGT within 30 days of the day after the property sale if the sale was completed between 6 April 2020 and 26 October 2021. For disposal after 27 October 2021 a Non-Resident Capital Gains Tax (NRCGT) return must be filed and the CGT paid within 60 days of the completion of sale. Failure to submit the return or pay the tax on time will result in penalty and interest being charged by HMRC.
HMRC has a Non-Resident Capital Gains Tax calculator that you can use to calculate your CGT liability. It normally takes about ten minutes to put in all the information necessary to do the calculation. However, the Non-Resident Capital Gains Tax calculator is not suitable for everyone.