Since 6 April 2020, new requirements have been introduced to accelerate the reporting and payment of Capital Gains Tax (CGT) on the disposal of UK land and residential property by individuals, trustees, personal representatives, partners of partnerships, and joint owners. The changes primarily affected UK residents holding UK residential property, but the payment regime also affected non-UK residents, bringing both UK and non-UK residents into the same harmonised regime.

UK residents

If you are a UK resident and dispose of UK land and property, you must calculate, report, and pay CGT to HMRC on a separate return within 60 days following the completion of the property sale. Initially, the period was 30 days (completion dates between 6 April 2020 and 26 October 2021), but in the 2021 Autumn Budget, this period was increased to 60 days for completion dates on or after 27 October 2021.

It is important to note capital gains can also arise on the gift or sale at undervalue of a property, which also needs to be reported within the 60-day time scale.

The requirement to file applies to UK residents, even if you intend to file a Self Assessment (SA) tax return for that year. However, you do not have to complete the capital gains return if you sell the property you live in, provided you have lived in it throughout your period of ownership, as this gain is likely to be covered by the Principal Private Residence Relief. You also do not have to file a CGT return if no CGT is payable.

Non-UK residents

The reporting requirements for non-UK residents have been in place longer than for UK residents.

For the disposal of UK land and property between 6 April 2015 and 5 April 2020, non-UK residents were subject to a 30-day CGT reporting and payment regime (non-resident Capital Gains Tax – NRCGT). If you dispose of UK residential property or land after 6 April 2020, you must report the gain within 60 days and pay the CGT liability within the same time frame. The reporting requirement is irrespective if CGT is due or if you have made a loss.

How to report

UK residents are required to set up a Capital Gains UK property account to file a CGT return, which is made using an HMRC digital service. It is a standalone service, not within the Personal Tax Account, and it does not use Self-Assessment accounts or references.

The return is made online using your Government Gateway ID, if you have one. If you do not have an ID, you must create one when you sign in.

Non-UK residents now fall within the same reporting regime. The reporting requirements extend to all direct and indirect disposals of UK residential and non-residential property and land, including property-rich companies.

Agents can submit returns on behalf of clients. However, you must set up the CGT UK property account regardless of whether you report the gain or appoint an agent. Once the account is set up, you can authorise an agent to report the gain. Following successful filing, the agent and client will receive a confirmation email from HMRC with a payment reference used to pay the CGT liability.

Penalties & interest

Late filing penalties may be charged (up to £700 or 5% of the tax due, whichever is greater) as well as interest on any unpaid tax. These apply to both UK and non-UK residents.

CGT rates and Annual Exempt Amount

The CGT rates for residential property are 18% for the basic rate taxpayer and 28% for the higher and additional rate taxpayer.

The tax-free capital gains Annual Exempt Amount (AEA) for the 2023/24 tax year has decreased by more than 50% from its 2022/23 threshold of £12,300 to £6,000. For the 2024/25 tax year, this allowance is further reduced to £3,000.

Considerations

The rules on CGT can be complex and dealing with HMRC can be a challenging experience. A tax computation must be prepared to calculate the estimated tax due, and the CGT return can be amended for inaccuracies or details finalised after the filing deadline.

Further tax planning opportunities may be available to mitigate or defer a CGT liability. It is essential to consider these before a sale or gift of UK residential property or land is made.

If you are planning on selling or gifting residential property and would like our assistance with the CGT reporting requirement under the 60-day rules or advice on how you might mitigate your liability please get in touch with your usual haysmacintyre contact within the Private Client and Trust team.