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With effect from 6th April 2020, all UK residential properties disposed of by UK resident taxpayers that create a chargeable gain for Capital Gains Tax (CGT) purposes will have to be reported to HMRC within 30-days of the disposal. Moreover, the CGT payable will have to be paid over to HMRC in the same 30-days.

Pay Capital Gains Tax on Residential Property in 30 Days

Changes in capital gains tax on private residences from April 2020 as:

1. What if I sell a property and don’t make a taxable gain?

The new 30-day disclosure deadline only applies, to property disposals that create a taxable gain. For instance, if you make a loss on the selling of a buy-to-let property, you will not have to make a return within the 30-days. Similarly if the property has been your home and after the application of Principal Private Residence Relief the gains is exempt, you don’t need to file a return within the 30 days.

2. Does this mean I have to make a tax return every time I sell a property?

In practice, yes, if the disposal creates a taxable gain

3. How do I work out how much tax is payable?

As part of the 30-day submission to HMRC, you are required to estimate the amount of CGT payable based on your present understanding of the factors that affect this liability. As your other earnings will determine if the CGT you pay is at 18% or 28% - or a mix of the two – estimating these other earnings and getting the number crunching right will be no mean feat.

During the 30-day window the process will be:

  • Prepare a formal computation and a calculation of the CGT due, and submit both to HMRC, and
  • Pay any CGT this computation reveals.

At the end of tax year during which you made the disposal you will also need to include the computation again as part of your actual return. This annual confirmation of the gain may result in an over or under payment of tax as the annual return will be based on actual data and not the estimated data used to comply with the 30-day rule.

4. I am looking to sell a property in the near future, what could I do to avoid paying tax in 30 days?

The property owners that are planning to dispose of their UK residential property which is likely to create a chargeable gain have a short planning timeframe.

If you can sell your property before 6 April 2020, any taxable gains are still reportable as part of your self-assessment tax return for 2019/20 and will be subject to the present filing and payment rules. For 2019-20, these are:

  • Gains on disposals up to 5 April 2020 have to be filed by 31 January 2021, and
  • Payment of any CGT due will be due on the same date, 31 January 2021.

Accordingly, if you can complete your sale before 6 April 2020, you can benefit from a more relaxed filing and payment regime.

DNS can only help you meet the 30-day deadline if you are disposing a property after 5th April 2020. This can only be done if we have the required information about the disposal on the day you sell. It is recommended to follow the below steps to ensure the deadline is met:

  1. Prior to the completion date, you are requested to advise us which property is to be sold and the estimated selling price and sales costs.
  2. We will immediately compile the data we have about the property (if we hold this information) and confirm with you if it is correct. This will not only include the purchase price, but also improvements made. Otherwise you will be required to provide us the purchase costs (including legal and stamp duty) and the cost of any improvements to the property.
  3. We will use all this information to prepare a draft computation (based on our prior knowledge of your tax affairs) and advise you of the possible CGT payable 30-days after the sale is completed.
  4. When the sale does complete, we can then adjust the numbers for any final changes in the sale particulars and agree the computation with you.
  5. Once agreed, we can file the CGT computation with HMRC and advise you when and where you should pay any tax due.

Please note failure to meet the deadline could result in penalties and interests from HMRC.

This is a major change in the reporting and payment of CGT on chargeable UK residential property sales. Please call us on 03330 88 66 86 or email on info@dnsaccountants.co.uk, if you need more information regarding this important tax change.

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