Have you sold, or are you thinking of selling a residential property which you let out or used as a holiday home, and which will give rise to a taxable capital gain?

If so you should be aware of the requirement to report the disposal to HMRC, and pay the capital gains tax due, shortly after the completion date, as well as including it in your self-assessment tax return for the year of disposal. Before 6 April 2000, this tax did not have to be paid until the 31st January following the end of the tax year in which the disposal occurred.

For instance if you sold a buy to let property on 30 June 2019, the disposal did not need to be reported until the self-assessment return for the tax year 2019/20 was prepared and any capital gains tax due was not payable until 31 January 2021.

However if the property was sold on 30 June 2020 (i.e. after 5 April 2020), the disposal had to be reported on a capital gains tax return within 30 days (i.e. by 30 July 2020), and any tax was payable on that date.

The deadline posed a number of challenges, not the least of which being the difficulty which a lot of people encountered in trying to register with HMRC for submission of the capital gains tax return, and also getting the necessary information together and calculating the tax bill, within 30 days. Thankfully those issues have been recognised by HMRC, and included in the recent Budget was a provision extending the deadline for submission of the return and payment of the tax to 60 days – still a lot earlier than under the old system, but a welcome extension which eases the pressure and reduces the chances of picking up a fine for late submission/payment.

It is however still quite a tight deadline when, for instance, there is a lot of research to be done to find out the original cost and related expenses, and any allowable costs of improvements to the property since acquisition. The calculation of the amount of tax payable will depend upon the amount of the gain, the rate of tax applicable to the individual’s income for the year, and any reliefs (such as losses) which may be available. It is worthwhile starting this exercise once the disposal of the property is certain to happen, in order to save time after completion.

Author: Peter Hedgethorne, Director, Plus Accounting

Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.

Date Published: 23 December 2021