Capital Gains Tax Return on Sale of a UK Residential Property – 60 Day Deadline - A4G LLP

It is difficult to keep on top of the forever changing tax rules that might affect you each year, especially as personal circumstances often change. It is vital you are aware of these changes (which is why we always email our clients of any changes and send subsequent reminders) to ensure you keep on top of your responsibilities.

Sending your tax return information to us as soon as possible after the 5th April deadline each year allows us to identify and resolve any issues that might affect you at the earliest opportunity, keeping any additional HMRC charges to a minimum.

As a client, if you haven’t yet sent your tax return information to us please do so now we can ensure you are up to date.

If you are thinking of selling a UK residential property, remember that you have only 60 days from completion within which you need to notify HM Revenue & Customs and to pay any Capital Gains Tax (CGT) due!

Unless a property is your only or main residence, Capital Gains Tax (CGT) must be calculated when a property is sold or transferred. In the past, if you are UK resident, any tax was previously payable by 31^st January following the end of the tax year. This has changed and now tax is due within 60 days. As the person selling the property you are responsible to notify HM Revenue & Customs (or us) that the sale has taken place. Your solicitor will not do this automatically.

Where a sale takes place after 27^th October 2021, owners of UK residential property must complete and submit an extra form to HM Revenue & Customs (HMRC), as well as pay any tax, within 60 days of the completion date. Non-UK resident landlords must adhere to these rules for sale of commercial property too.

If you have owned the property for a long time this means that you will need to make sure you have the original purchase details and details of any capital expenses from the period of ownership to be able to accurately calculate any gain.

This involves not only more administrative work, but further complications for the unprepared, including a potential negative cash flow issue due to the complexities of the calculations for the estimated tax. You will need to have to hand a record of the:

Original acquisition dates and costs
Capital costs incurred during ownership
Details of any other capital gains or losses made in the same tax year

You will also need to provide a good estimate of your overall expected income from all other sources so that the ‘in year’ tax paid is as accurate and as low as possible.

If you are selling multiple assets in a year, some of which result in capital losses, the timing of these could be crucial as only losses made before the property sale will be able to set against the ‘in year’ tax bill. If you make losses after this disposal they won’t get taken into account until the end of the tax year – so you are paying tax now and may have to wait a number of months to get it back!

The CGT is entered onto the personal tax return as usual, so if the amount due at the end of the tax year differs from the estimated amounts already submitted it can be rectified at that point and any overpayment will be refunded. Depending on timing however the return may be submitted many months after the property sale and so you could be out of pocket for a long time.

Whilst the administrative burden on you as a landlord continues to increase, being prepared is the best way to tackle such situations. Some simple planning is always a benefit. You should maintain a summary of the information that might be needed in the event of a disposal so that calculations are accurate and you do not pay too much too early. Or if you are likely to dispose of multiple assets subject to CGT you should plan the timing of these so that losses can be used in the best way.

How can we help?

The circumstances will be different for each sale so it’s best to talk to an adviser to ensure you are prepared and plan for Capital Gains Tax. We are a friendly, knowledgeable firm of Chartered Accountants with specialists in tax for landlords. Visit our dedicated page for landlords here, or call us on 01474 853 856 or email enquiries@a4g-llp.co.uk.