If you are thinking of selling a property, especially one which is not your main residence, are you aware of the new rules that came into force on 6th April 2020?
The major change that will likely affect you is that the reporting and payment times for Capital Gains Tax payable on the sale of second homes and buy-to-let properties has significantly reduced to just 30 days.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell (or ‘dispose of’) an asset that has increased in value since you purchased it. To clarify, you are not taxed on the full amount you make from the sale, only the profit or ‘gain’.
What does it mean to ‘dispose of’ an asset?
Disposing of an asset refers to more than just selling it, and can include:
- Gifting or transferring it to somebody else
- Exchanging it for another asset
- Receiving compensation (e.g. an insurance pay out) due to the loss or damage of the asset.
When do I have to pay Capital Gains Tax on a property?
You will usually be taxed on the sale of a property if it is a second home or buy-to-let property, or if you have let out part of your main residence. CGT also applies to the sale of commercial premises, land and inherited property.
What do you need to do?
If you sell a UK residential property and a chargeable gain arises, you will need to report the gain to HMRC on a CGT return and pay the tax within 30 days of completion. HMRC will issue penalties and charge interest if you needed to report a gain/pay tax and failed to do so.
You are expected to make your CGT return and payment online via HMRC’s government gateway. If you don’t have a government gateway account, you’ll need to apply for one – a process which can take up to 10 working days.
Tax wise, you will pay CGT of 18%, 28% or a combination of the two, depending on your tax band.
If you complete a tax return you will also need to include details of the disposal on the return as normal, paying any tax adjustment through self-assessment.
If you have sold, or are thinking of selling a property, and you need advice on CGT, please get in contact with us. We have Accountants on hand who can help to prepare Capital Gains Tax calculations for you and also assist with the Government Gateway and filing process.