Are you looking to sell, or have recently sold, a UK residential property but are unsure how the tax laws apply to you? In this week’s Tax Tuesday, we will be discussing everything you need to know about correctly reporting your property returns to HMRC.
Capital Gains Tax and the 60-day deadline
If you are a UK resident and you have recently sold a residential property in the UK, it is important that you report the property return to HMRC and pay the associated Capital Gains Tax (CGT) within 60 days of selling the property if the completion date was on or after 27 October 2021.
Missing this strict deadline can result in penalties that quickly escalate over time. Remember, you only need to report the property return if CGT is payable. So, if you qualify for Private Residence Relief, or you are gifting a property to a spouse or civil partner this Christmas, no report is necessary (more on this below).
That said, the 60-day rule applies to most disposals of residential property in the UK. For example, if your property sale is completed on the 12th of January, you must report your CGT and pay it by the 13th of March. Keeping relevant documents readily available during the property sale process can help you meet this deadline seamlessly.
As of 30 October 2024, the rates of CGT on property are the same as on other assets:
| Gains type | Basic rate | Higher rate |
| Property (from 6 April 2024) | 18% | 24% |
| Property (before 6 April 2024) | 18% | 28% |
| Other assets (from 30 October 2024) | 18% | 24% |
| Other assets (before 30 October 2024) | 10% | 20% |
Penalties for missed deadlines
You may have to pay interest and a penalty if you do not report and pay on time. According to gov.uk, you may be charged as follows:
- A penalty of £100 if the return is not filed within 60 days
- Daily penalties of £10 per day for 90 days after your return or document was 3 months late
- Applied late payment interest rate of 7.25% (rate as of 26 November 2024)
- A further penalty of £300 or 5% of estimated tax liability, whichever is greater if the deadline is missed by more than 6 months
- A further penalty of £300 or 5% of estimated tax liability, whichever is greater if the deadline is missed by more than 12 months
Further penalties may apply if the delay in filing is deliberate or if the tax return conceals information about the gain.
Important note for non-residents
The information in this blog applies to UK residents only. If you are a non-resident of the UK, the deadline to report your property disposal is the same – 60 days – but there are additional rules to bear in mind. Non-residents must report the disposal even if:
- You have no tax to pay
- You have made a loss
- You are registered for Self Assessment.
For more information, check gov.uk for guidance on non-resident Capital Gains Tax returns.
What type of properties do I need to pay Capital Gains Tax on?
CGT is a tax on the profit when you sell an asset that has increased in value. However, it’s important to note that if your gains in a year are under the tax-free allowance then you do not need to pay any CGT. For reference, the capital gains annual exempt amount for 2024/25 is £3,000.
Although qualifying for Private Residence Relief can exempt you from having to pay CGT, there are a few property types which you are required to pay CGT for. These include:
- Buy-to-let property
- Second homes
- Land
- Inherited property
- Business premises
What if the property was jointly owned?
If the property was jointly owned, you must report your own gain or loss. Special rules apply if you give a UK property to your spouse, your civil partner, or to charity.
For example, you do not pay Capital Gains Tax on assets you give or sell to your husband, wife or civil partner, unless:
- you separated and did not live together at all in that tax year
- you gave them goods for their business to sell on
Your spouse or civil partner may have to pay tax on any gain if they later dispose of the asset. Their gain will be calculated on the difference in value between when you first owned the asset and when they disposed of it.
Are there any expenses that I can deduct?
The last thing you want to do is pay more CGT than you need to, so it’s important to know of any deductible expenses. The costs that you can deduct from taxable gains include:
- Stamp Duty paid when buying the property
- Estate agents’ fees
- Solicitors’ fees
- Certain other buying and selling costs
- Costs for improvements to the property
However, you can’t deduct costs for the maintenance of the property or mortgage interest from the taxable gains.
How can we help?
If you still have questions about reporting and any other obligations for your property sales, contact our team at tax@haroldsharp.co.uk or call 0161 905 1616. We’re here to ensure you meet your tax obligations and avoid unnecessary penalties.