Rules for the reporting and payment of capital gains tax for the disposal of UK residential property

HMRC introduced new rules for the reporting of capital gains tax from 6th April 2020. We have set out below a list of FAQs which we hope will assist you in understanding these rules.

I have sold a UK property, what do I need to tell HMRC?

If you have made a gain on the sale of a residential property that was not your main home throughout your ownership, then you must report the gain to HMRC and pay any tax due within 30 days of the sale if completion took place between 5th April 2020 and 27th October 2021. After that date, reporting must take place within 60 days of completion.

The gain must be reported using HMRC’s online standalone return through their real time Capital Gains Tax Service.  You need to include a calculation of the gain on the form.

What disposals must be reported?

It is not just the sale of a property that must be reported.  If you gift a property to someone else, or into a trust or a company, the transaction must be reported to HMRC within 60 days with any tax payable paid at the same time.

When does the form need to be filed?

The form currently needs to be filed within 60 days of the completion of the transaction – 30 days if the sale took place before 27th October 2021.

When do I pay the Capital Gains Tax?

The tax must be paid within the same time frame as above. Technically this is just a payment on account with the final gain being calculated in your tax return for the year.

What information will I need to report?

The information HMRC requires includes:

1. Property address and postcode
2. Date of acquisition of the property and cost of purchase including expenses incurred on the purchase
3. Date of exchange of contracts for the disposal of the property
4. The sale price and costs of sale of the property
5. Date of completion of the sale
6. Enhancement costs such as renovation costs
7. Details of tax reliefs, allowances or exemptions which you may be entitled to

Are there any exemptions?

You do not need to declare the sale to HMRC if:

1. The property was your main home throughout the entire period of ownership and you can make a claim for Principal Private Residence relief, which exempts any gain from tax
2. The disposal was to a spouse or civil partner
3. The gain plus any other gains during the year are within the tax-free capital gains tax allowance – currently £6,150 (2023/24) and the total proceeds are less than £50,000.
4. The property was sold at a loss
5. The property is not in the UK
6. Where a legal binding contract for sale was made before 6th April 2020

If you are not UK resident, you will need to report all disposals of UK residential property even if you meet one of the above exemptions.

Will there be a penalty if I am late with filing the form?

Yes, penalties for late filing will apply as follows:

• Up to 6 months late, you will get a penalty of £100
• Between 6 and 12 months late, a further penalty of £300 or 5% of any tax due, whichever is greater
• More than 12 months late, a further penalty of £300 or 5% of any tax due, whichever is greater

What happens if I am late paying the tax due?

Interest will be charged on the late payment of the tax in the usual way.

I am already in self-assessment, do I still need to report the gain separately?

If you are already in self-assessment, you are still required to report the disposal on HMRC’s Capital Gains Tax Service. In addition, you also have to show the disposal on your self-assessment tax return.

I am not in self-assessment, what do I need to do?

You will still need to complete the online standalone return through HMRC’s Capital Gains Tax Service. You will need to pay the capital gains due within 60 days of the completion of the disposal. However if you are not in self-assessment and have only a ‘one off’ disposal and you have no other reason to complete a self-assessment return you will not need to register for self-assessment solely for the purpose of reporting a residential property disposal.

To complete the form, do I need to register with HMRC?

Yes, you will need to register with HMRC.  There are two steps which you need to complete as follows:

1. Obtain a Government Gateway account

You will need to register with HMRC for a Government Gateway account. You will need the following information to hand to set up the account:

1. A valid email address
2. UK Mobile phone number
3. National Insurance number
4. Date of Birth
5. Your passport

2. Set up a Capital Gains Tax Service online account

Once you have your Government Gateway account, you will then need to set up a Capital Gains Tax Service online account. The account has a unique number which can be given to your usual Gravita contact who can then apply for authorisation to act and report disposals on your behalf.

I am not UK resident, do these rules still apply to me?

Yes. Non residents must declare all disposals of UK residential (or mixed used) properties and where relevant pay the capital gains tax within 60 days of completion. The way the gain is calculated may be different to the way it would be calculated for someone who is UK tax-resident, so you should seek advice to ensure that you pay the correct amount of tax.

Are the rules for UK companies that sell UK residential property the same?

No. UK companies do not have to declare the gain to HMRC through the Capital Gains Tax Service within 60 days of the sale or pay any tax that is due.  Instead, companies simply declare the disposal in their accounts and UK corporation tax return in the usual way and pay any tax due as normal.

What about non-UK companies that sell UK residential property?

From 6th April 2020, non-resident companies that own UK residential property became subject to UK corporation tax on their profits from rent as well as disposals having previously been within the income tax regime. You can read more about this here. As a result of this change, the non-resident company is treated the same as a UK company and is not required to report the gain through HMRC’s Capital Gains Tax Service within 60 days or complete a Non-resident Capital gains tax return. Payment of corporation tax is usually due nine months and one day after the end of the accounting period.

How can we help?

We can assist you with the preparation of the calculation and completion of the online form that will need to be submitted to HMRC. We can ensure that all the correct reliefs and any exemptions are claimed on your behalf. If you have any questions, you should get in touch with our experts here at Gravita.

Doing business in the UK

The Gravita team are delighted to help international businesses setting up in the UK with their tax needs. Please contact one of our experts to find out more.