Same Gains, More Tax and Reporting!

For 2024/2025 the Capital Gains Tax (CGT) annual exempt amount has fallen to £3,000 having been £12,300 two years ago. Where gains are above the new threshold, this will mean higher CGT to pay than in the past.

Those disposing of residential property have the added complications of 60-day reporting of gains and payment of any CGT liabilities within the same time frame. If you get it wrong, hefty penalties may apply and late payment interest (currently 7.5% pa) will be incurred.

60-day reporting

In broad terms, you must report the gain on a special return, having previously set up a UK property account, and pay the tax due within 60 days of completion of the sale or disposal. Given the tight timescale, being prepared in advance is key. Please let us know immediately if you are considering the disposal of any property to which this could apply, so that we can make sure you have all the paperwork needed to calculate any gain promptly.

It has been possible to print a paper return from HMRC’s website since April 2023, but this can only be used by the ‘digitally excluded’ and certain other persons who will be unable to submit returns online. In any event, there are often delays in processing paper forms and, when used, it is not possible to make a payment before the payment reference is issued.

Note that payments of any tax due under the 60-day regime are dealt with separately from any other HMRC liabilities, including those due under self-assessment.

Payment reference

This should be a 14-digit number starting with X and is found in the taxpayer’s online UK property account (or in a letter sent to them by HMRC after they have submitted a paper return). Do not make the payment into your HMRC self-assessment (SA) account using your unique tax reference (UTR), as the payment may be allocated against other liabilities, after which it may not be possible to re-allocate it to the property gain.

If you are within SA, you will need to report the disposal on your SA return after the end of the tax year. Unfortunately, this is in addition to, not instead of, the 60-day return. This could show that there has been an overpayment of CGT (e.g. if you have made a capital loss later in the tax year). Overpayments should now automatically be set against other tax liabilities for the year (e.g. income tax), but if there is an excess, HMRC will have to be contacted directly to arrange a repayment.

A penalty of £100 is charged if a return is filed after the deadline. A further penalty of either £300 or 5% of the tax due – whichever is higher – is charged if the deadline is missed by six months, and then that penalty is repeated if the failure continues after 12 months.

Although it is not currently HMRC’s practice to do so, they can also charge a £10 daily penalty if the return is more than three months late, up to a maximum of £900.

If you have any concerns about the onerous reporting rules for UK residential property gains, please get in touch and let us help.