Capital Gains Tax on UK residential property – here’s what you need to know about recent changes

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A recent change in the rules concerning Capital Gains Tax (CGT) on UK residential property could have an impact on Australian residents and British expats who still own residential property in the UK and have either just sold it, or are planning to sell it in the future.

Up until April 2020, non-UK residents were required to file a return, known as the ‘Non-Resident CGT return’ on the sale of a UK property. CGT has always been payable, but only at the same time as submitting a Self-Assessment tax return.

However, Her Majesty’s Revenue and Customs (HMRC) have now introduced a 30-day requirement to file a tax return detailing the sale, and to pay any Capital Gains Tax (CGT) owing on the sale of residential property at that time.

30 days to pay

The changes mean that when a residential property in the UK is sold, the vendor must both file an online return of any taxable gain arising, and pay any CGT due, within 30 days of the date the sale completes. This applies equally to non-UK residents who sell a residential property in the UK.

Anyone failing to comply with these new regulations will face financial penalties and interest payable.

Automatic late filing penalties will apply if the required return is not filed within 30 days of the property sale completion date. These penalties are the same as those currently applicable to the UK’s Self-Assessment tax return regime:

  • An immediate £100 late filing charge
  • After three months, daily penalties will start to accrue
  • Further £300 penalties at six months and nine months.

In addition to these charges, late payments and underpayments of the outstanding amount of CGT payable will attract interest.

Estimated figures required

To give taxpayers time to become familiar with the new system, HMRC waived penalties for late returns that were submitted up to 31st July 2020 for disposals of property up to 30th June 2020. However, for completions since then and from now on, the 30-day period is very much applicable and in force.

This obviously means that, in most cases, the return will need to be submitted to HMRC part of the way through a tax year, rather than at the end of it. It will therefore be necessary for anyone submitting a return to make a reasonable estimate of the CGT payable as if the tax year ended on the date of the sale of the property.

So, the taxpayer will need to estimate taxable income for the year to work out whether the gain falls wholly or partly in the basic rate CGT tax band at 18%, or in the higher rate of 28%.

Where the final figure at the end of the tax year turns out to be different to the estimated figure, an amended return can be filed which corrects the original estimated figures. The key point here is to submit a return and make payment to avoid the penalty charges outlined above.

The taxpayer’s subsequent Self-Assessment tax return for the full year of the property sale will include all other CGT-eligible disposals arising during the tax year, in the usual way.

Remember that this provision only applies to the sale of UK residential property. CGT on the disposal of other assets in the UK will continue to be due for payment on 31st January following the end of the tax year in which they were sold.

In a nutshell

If you’re selling a residential property in the UK, you need to make a submission to the HMRC within 30 days of the completion of the sale. This submission should include an estimate of CGT payable on the profits of the sale, together with payment.

We can help you

bdh Tax is experienced in the preparation of CGT calculation. We have been preparing and lodging non-resident CGT returns for non-UK resident clients who are selling UK residential property for many years. We can therefore support you with addressing the issues arising as a result of the changes outlined in this article.

If you’d like to know more about our services and how we can help you, please get in touch.