Property disposals
A recent article in the Financial Times reported that one-fifth of buy-to-let investors and second homeowners who incurred capital gains tax from property sales in the last tax year failed to pay their tax bill on time, despite an extension to the reporting deadline.
6th September 2022
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Gavin Jones See profile
Despite mounting concerns over interest rates and the cost of living, house prices continue to climb. In the year to July house prices rose 11 %, according to Nationwide, taking the average property price in the UK to £271,209.
There are, however, signs of a slowdown in activity, with a dip in the number of mortgage approvals for house purchases in June. Robert Gardner, chief economist at Nationwide stated: ‘Demand continues to be supported by strong labour market conditions, where the unemployment rate remains near 50-year lows and with the number of job vacancies close to record highs. At the same time, the limited stock of homes on the market has helped keep upward pressure on house prices.’
With changes to mortgage interest tax relief over the last few years and a raft of new legislation it has prompted some property investors to consider selling up. With significant Capital Gains Tax (CGT) built up for these properties, the tax implications of selling can make this a difficult decision.
From 6 April 2020, UK residents, who make a disposal of UK residential property must use the CGT UK Property Account to report and pay to HMRC any CGT arising from the disposal:
- Within 60 days of disposing of the property if the completion date was on or after 27 October 2021.
There is no need to report any disposal where there is no CGT liability. If the gain is fully covered by the private residence exemption, annual exemption (currently £12,300), where brought forward or current losses or other CGT relief applies, this can reduce the gain to nil meaning there will be no liability.
If you have already made a Self-Assessment (SA) return and realise that you should have submitted a CGT on UK Property return during the tax year (30/60 days from the date of completion), you cannot use the digital service to report the gain and must do so by completing a paper CGT on UK Property return.
It remains important to start the process of considering the gain as early as possible and taking advice prior to selling to ensure the transaction is tax efficient and reporting deadlines are met.
If you are unsure whether you need to pay CGT in relation to a property sale, please contact our expert on this matter, Dan Wilton.