Reporting Capital Gains on UK Residential Property

Capital Gains Tax on Residential Properties

There are changes coming into force from 6 April 2020 on the reporting of disposals of UK residential property to HMRC. Capital gains will have to be reported using HMRC’s online, real-time service within 30 days of completion of the sale. An estimate of the tax due on the disposal will also have to be paid within this 30-day period. 

The new reporting requirement is not required if there’s no gain chargeable to capital gains tax (i.e. a capital loss arises, or the property is covered by the main home exemption for the entire period of ownership). The new rules will largely affect landlords selling property lets and the sale of second homes. If a gain qualifies as a main home, but hasn’t done for the entire period of ownership – or part of the home is used entirely for business purposes – then a gain may need to be reported using the real-time service. 

Where a real time Return is required, this could be quite a straightforward calculation, but it’s not always the case. It may be necessary to obtain the following: 

  • Valuations – such as where the property is gifted on disposal or when acquired.
  • Historical information – on dates when it qualified as a main home.
  • Changes in ownership – if there’s more than one owner. 
  • Capital improvements to the property.
  • Details of the original acquisition.

An understanding of the level of a person’s taxable income for the tax year of disposal will also be required to establish what rate of tax to apply to the capital gain.

In some situations, it could be difficult trying to obtain sufficient details or information to make a reasonable estimate within the 30 days after completion. Therefore, the sooner this information is obtained on a potential sale the better.

HMRC will charge penalties for late submission of the Return, which start at £100. However if the Return is a year late, this could escalate to £700 and higher penalties could also be accrued based on a percentage of the tax due.

If your client is within the Self Assessment system already, they will have to complete the real time Return. Also, they must still report the gain on their Self Assessment Return.

It is worth mentioning that for non-UK residents, capital gains on all property transactions (including commercial property) already have to be reported. Payment on account must be made using the 30-day real-time service.  

We recommend you warn your clients of the above and suggest they inform their accountant of the disposal as soon as possible. We are happy to assist your clients with these Returns.  Our fee for preparing the calculations and completing the online Return is £795 plus VAT.  

If you or your client need advice on the new rules and how to report capital gains on UK residential property, please contact us or email: accountants@charnwoodaccountants.co.uk