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November 8, 2023
The rules around Capital Gains Tax and property sales are continually changing and many homeowners and their advisers may not be aware that they owe tax on the disposal of a property.
Typically, when a main home is sold no CGT is due. However, in some circumstances, you may have to pay tax, at a rate of either 18 per cent or 28 per cent, on the gains you have made.
Who is affected?
Those who own a property other than their main residence will have these CGT rules applied to them.
This includes let properties, second or holiday homes and homes with significant grounds and gardens, as they may not benefit from Principal Private Residence (PPR) relief.
You only have to pay CGT on gains that exceed your annual allowance (the current tax-free allowance is £12,300 per person).
If you are the sole owner of a property, you can double your allowance on a future sale by sharing ownership with your spouse.
Any Capital Gains Tax (CGT) due on UK residential property disposals made by UK residents must be reported and paid within 60 days of completion.
How to report CGT
To report the sale of a UK residential property to HM Revenue & Customs (HMRC) it may be necessary to create a Capital Gains Tax on UK property account, which we can help with.
This will allow you to:
Whilst there are some exemptions from completing a return, for example where no tax is due, the short deadline gives limited time to retrieve supporting documentation, prepare CGT calculations or obtain valuations if needed.
Non-UK residents must also report all sales or disposals of UK property (residential and non-residential) within 60 days – even if there is no tax to pay or they have made a loss.
It is easy to overlook these requirements during the sale of a residential property, but this information must be reported to HMRC within this new time frame and any tax paid.
Penalties and interest for late filing are no longer linked to the tax return filing deadlines, which were previously made on an annual basis.
The new rules surrounding CGT on property sales are complex and so it is worth seeking advice if you are unsure of how this affects you or those you support.
For advice and support please contact Chris Moir, Head of Personal Tax, at RMT Accountants & Business Advisors on 0191 256 9500 or via the contact us form.