Residential property
08 Apr 2020 News

Reminder - 30 day reporting requirement on CGT for residential property owners

30 DAY REPORTING REQUIREMENT

If you are UK resident and you make a gain on the sale of residential property in the UK which gives rise to a tax liability, you are required to report the gain to HMRC and pay the related capital gains tax within 30 days of completing the sale of the property.

If you are not resident in the UK then you are required to submit a Non-Resident Capital Gains Tax return within 30 days of the sale or disposal of any property located within the UK – not only residential property.  The rules for non-residents are different to those for UK residents.  If you are non-resident please refer to our separate briefing note “Capital Gains Tax for Non-Residents”.

 Capital Gains Tax

The sale or gift of all residential property is potentially within the charge to capital gains tax.  Often there is no tax to pay if the seller has lived in the property and used it as their main home throughout their period of ownership.  In this situation, the whole of any gain realised on the sale or gift of the property will be exempted by Principal Private Residence Relief (PPR Relief).

However, there are many situations where the disposal of residential property will not qualify for PPR Relief or where PPR Relief will be only partially available so that some of the gain on the property will remain chargeable to capital gains tax.

Common situations where the sale of residential property might give rise to a capital gains tax liability include the following:

  • The seller has never lived in the property (eg where a property has been bought as a buy-to-let investment).
  • The property has not been the seller’s main residence (eg second homes and holiday homes).
  • The seller owns one home and the seller’s spouse or civil partner owns another home. Only one of the properties can be the couple’s main residence.
  • The property was inherited and the seller has not used the property as their main home during their period of ownership (eg an individual who inherits the house they lived in as a child on the death of a parent but who rents it out after their inheritance rather than living there).
  • The property has been used as the main residence of another family member but not the seller (eg a property bought for the use of a child while at university or an elderly parent or relative).
  • The property has not been the seller’s main home throughout their period of ownership – for example, due to:
    • Seller had more than one property and, for a period of time, one of the other properties was their main residence.
    • Seller stayed somewhere else for work-related reasons (eg a secondment).
    • Seller spent time travelling or working abroad.
    • Seller lived in another property with someone else (eg with a parent or partner).
    • Seller lived in rented accommodation and let out the property they owned.

Examples of these situations, and the impact on the seller’s capital gains tax obligations, are set out in the attached schedule.

Tax Obligations

If you make a capital gain on the sale of your residential property and tax is payable then, within 30 days of the date of completion, you must:

  • Report details of the disposal, including a calculation of the capital gain, to HMRC; and
  • Pay the relevant capital gains tax.

HM Revenue & Customs instructions on how to report and make payment of capital gains tax can be found by clicking here. The return may be made by the taxpayer or by an agent acting on the taxpayer’s behalf.

Penalties and Interest

Failure to comply with these obligations may result in the imposition of interest and penalties.

HMRC may charge the following penalties for late filing:

Return filed late

£100 fixed penalty

More than 3 months late

Daily penalty of £10 for a maximum of 90 days

More than 6 months late

Higher of 5% of capital gains tax liability and £300

HMRC can also impose penalties and interest for late payment of the tax due.

Self-Assessment Tax Return

In addition to the above, if you normally file a self-assessment tax return then you must also include details of the property disposal in the capital gains tax section of the return.  You will receive credit for the capital gains tax you have already paid against your total capital gains tax liability for the tax year concerned.

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