Capital Gains are the profits arising on the sale or disposal or something that has increased in value in the time between acquiring the asset and selling it. A tax is due on this profit, unless your asset falls into the tax free category, designated by HMRC.
When your asset is a UK residential property sold after the 6th April 2020, UK tax residents are required to report to HMRC and pay the Capital Gains tax which is due within 60 days of completing on the sale of the property. Reporting must be completed via the HMRC capital gains system, regardless of whether you also complete a self-assessment return.
You do not have to complete a capital gains return on the sale of your primary residence as primary residence relied covers the full amount of the gain.
If you are a non-UK resident, the 60 day reporting limit applies to all disposals of UK land or property, regardless of whether there is a gain or not. Tax on any gains for non-UK residents would also be due within the 60 day window follow completion.
What do I need to report my CGT?
See below a list of information that you will need to have to hand to report your CGT gains:
- Capital Gains Number (details on how to acquire below)
- Postcode of your Primary Residence
- Property Completion Statement (showing Sale value and any legal fee costs)
- Address of Property (that you are reporting the gain on)
- Percentage Share of Property
- Purchase Date
- Purchase Cost
- Capital Improvement Costs
- Estate Agent/Solicitor Fees
- Details of individual’s earnings for the tax year (that you are reporting the gain in)
How is my gain and the tax calculated?
Simply, the gain is calculated by taking all your costs and deducting them from the proceeds of the sale. There are reliefs that can be applied, such as your capital gains allowance, which is £6000 in 23/24, and primary residence relief, which is applicable if you have lived in the property at some point during your ownership. Such reliefs serve to reduce your gain and therefore reduce the tax payable.
Tax is applied at a rate of 18% or 28% of your gain, depending on whether you are a basic rate of higher rate Income tax payer.
How to acquire a Capital Gains Reference
You will need to set up a Property Tax Account with HMRC. If you already have a Personal Tax Account, you can use these details to create a Property Account. If you do not have an existing Personal Tax Account with HMRC, you will need to create a Government Gateway account first and verify your ID.
At the end of the process, you will be issued with a Capital Gains reference number for the Property Account. This will be a 15-digit number in the format XYCGT1234567890. You must make a note of this, as it will be required for future steps.
What happens if you forget to submit my return or file it late?
Unfortunately, if your return is filed more than 60 days following the completion of the sale, it attracts a late filing penalty of £100. Returns filed more than 6 months after completion of the sale go on to attract an additional penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months late, attract further penalties (an additional £300 or 5% of tax due, as above).
It, literally, pays off to make sure that you are aware of your requirements for reporting on property sales and to take action to ensure that your return is submitted and paid on time.
Our team of experienced professionals are on hand to help with any of your needs regarding CGT reporting, so allow us to take the burden from you and deal with HMRC on your behalf.