April 2020 saw the introduction of reforms affecting Capital Gains Tax (CGT) on the disposal of UK residential property, including a significant change to the reporting of gains.
From 6 April 2020, if you dispose of a residential property, you must report and pay CGT within 30 days of the completion date. Previously, the deadline was 31 January following the end of the tax year of disposal, so this is a substantial change.
The process for reporting the disposal is completed online via a ‘Capital Gains Tax on UK Property Return’, either through your own Government Gateway account, or by your tax agent.
The return requires various information, in order to ensure that you are paying the correct amount of CGT. This is a complex area of tax.
If you have lived in the property as your main residence at some point during your ownership, you will be entitled to relief on part of the gain; you are allowed to deduct the cost of buying, selling, and making improvements to the property, but not all costs are deductible; the ‘cost’ of the property for the purposes of CGT will need to be clarified if you inherited it, if it was gifted to you (or sold at below market value), or if you purchased it prior to 31 March 1982; joint owners will each need to report their share of the gain; and you may have capital losses brought forward from previous years, which can be utilised against the gain.
The rate of CGT payable will also depend on your estimated gross taxable earnings for the tax year of disposal. HMRC may ask you to upload a document showing how the CGT has been calculated.
HMRC may charge interest and a penalty if you do not report the property gain within the 30-day time limit, however, due to Covid-19, you will not get a late filing penalty for any transactions completed between 6 April 2020 and 1 July 2020, provided that the gain is reported by 31 July 2020. The interest, however, will not be waived, so if the late reporting also means that the CGT is not paid within the usual 30-day time limit, HMRC will charge late payment interest.
Any amendments to the report after filing must be notified separately to HMRC. If you are registered for Self Assessment already, the gain will continue to be disclosed in your Tax Return.
If you need help with completing the new CGT return, or if you have any questions about the new rules, please feel welcome to contact us today.