If you sell a UK residential property and Capital Gains Tax is due, you will usually need to report the disposal to HMRC and pay the estimated tax within 60 days of completion.
The 60-day deadline is easy to overlook, particularly if you expect to report the sale later through Self Assessment. Late reporting or payment can result in interest and penalties, so it is important to establish your obligations as soon as possible.
The rules may apply when selling:
- a buy-to-let property;
- a second home;
- an inherited property; or
- a property that is now your main home but was previously let, used as a second home or did not otherwise qualify fully for Private Residence Relief.
The rules differ depending on whether you are resident in the UK.
If you are a UK resident
UK residents must report and pay any Capital Gains Tax due on the disposal of UK residential property within 60 days of completion.
You may not need to make a 60-day property return if no Capital Gains Tax is payable. This might be because the gain is covered by your available tax-free allowance, allowable losses or a tax relief.
However, if you are registered for Self Assessment, details of the disposal may still need to be included in your tax return for the relevant tax year.
If you are not a UK resident
Non-UK residents must report disposals of UK property or land within 60 days of completion, even if:
- no Capital Gains Tax is payable;
- the disposal results in a loss; or
- the property qualifies for Private Residence Relief.
The reporting requirement can include residential property, commercial property, land and certain indirect interests in UK property.
What if the property was your home?
You may qualify for Private Residence Relief if the property has been your only or main home.
Making a property your only or main home does not necessarily exempt the whole gain. If it was previously let or used as a second home, Private Residence Relief will normally be restricted to the qualifying periods of ownership, together with any additional periods allowed by the rules. This can leave part of the gain taxable and may mean that a 60-day property return is required.
Full relief is not determined solely by whether you lived in the property throughout your ownership. Other factors can affect the position, including:
- whether any part of the property was let;
- whether part of it was used exclusively for business;
- the size and use of the grounds;
- periods when you lived elsewhere; and
- whether the property was bought with the intention of making a gain.
The relief should therefore be checked before deciding that no Capital Gains Tax or property return is required.
What information will be needed?
To calculate the gain and complete the report, you will normally need:
- the property address and postcode;
- the date you acquired the property;
- the acquisition cost or relevant property value;
- the date contracts were exchanged;
- the completion date;
- the sale proceeds;
- the costs of buying and selling the property;
- details of qualifying improvement expenditure;
- details of any available losses, allowances or reliefs; and
- the property type if you are not resident in the UK.
For jointly owned property, each owner is responsible for reporting their own share of the gain or loss.
How is the disposal reported?
The disposal is normally reported through HMRC’s Capital Gains Tax on UK property service.
Before submitting the return, the capital gain or loss must be calculated and any available reliefs considered. An estimate of the Capital Gains Tax payable may also be needed because the final rate can depend on your income and other gains for the full tax year.
If an accountant or tax adviser submits the return, you will normally need to create a Capital Gains Tax on UK property account and authorise the agent to act for you.
Interest and penalties may be charged where a return or payment is late, so it is important to deal with the calculation promptly after the sale completes.
Need help?
If you are planning to sell, or have recently sold, a buy-to-let property, second home or other investment property, speak to us as early as possible.
We can:
- calculate any capital gain or loss;
- review the availability of Private Residence Relief and other reliefs;
- advise whether a 60-day property return is required; and
- deal with the HMRC reporting requirements on your behalf.
Early advice can help avoid missed deadlines, unexpected tax liabilities and unnecessary penalties.