CAPITAL GAINS TAX ON THE DISPOSAL OF RESIDENTIAL PROPERTY
From 6 April 2020 HM Revenue & Customs implemented a number of changes to the way in which capital gains tax on the sale of residential properties is calculated, and when associated liabilities are due for payment.
Despite these changes taking place over 3 years ago, HM Revenue & Customs are aware that property owners are still missing this deadline due to being unaware of the changes.
Capital gains tax – due date for payment of any liabilities
Prior to 6 April 2020, where a UK resident taxpayer disposed of a residential property, subject to capital gains tax, any tax calculated was payable by the 31 January following the tax year in which the disposal was made.
For example, if a UK resident taxpayer were to dispose of a residential property on 1 May 2019, any capital gains tax arising on that disposal wouldn’t be due for payment until 31 January 2021. The disposal would be reported as part of the taxpayer’s self-assessment tax return, which is due for submission to HM Revenue & Customs on the same date.
However, from 6 April 2020, due dates for payment of any capital gains tax, along with reporting the disposal to HM Revenue & Customs changed to a deadline of 60 days from the date of completion (originally the deadline in place was 30 days, however, following the 2021 Autumn budget this was extended to 60 days).
Failure to meet this deadline now results in penalties being levied by HM Revenue & Customs.
For example, if a UK resident taxpayer disposes of a property on 1 May 2023, any capital gains tax arising would be due for payment by 29 June 2023. This when compared to the previous example demonstrates the significant impact the change has on any capital gains tax payment due dates.
A separate payment for capital gains tax and associated report to HM Revenue & Customs must be made for each disposal in a tax year (and by each taxpayer if a property is held jointly), under the new capital gains tax legislation.
Capital gains tax – return
The return itself is submitted using the report and pay online portal.
This can be found using this link – https://www.gov.uk/report-and-pay-your-capital-gains-tax
It is advisable to commence the completion of this return in good time to ensure the 60 day deadline can be met. Depending upon reliefs available, the return can become fairly complex.
If you are looking to sell a residential property that may be subject to Capital Gains Tax, or wish to understand any of the above further, please contact your local Perrys branch.