The reporting of capital gains tax (CGT) on sales of UK property is changing from 6 April 2020. The changes will affect mainly UK resident individuals and trustees but there will also be a change to the existing CGT regime for non-UK residents disposing of UK property.

UK residents

UK resident individuals and trustees will be required to report capital gains arising on the sales of UK residential property on a ‘UK land return’ within 30 days of completion.

Within that same time frame, HMRC will expect a payment of the estimated CGT. Once the final CGT liability is known, it will be reported and accounted for via the self-assessment tax return. If the final CGT liability is greater than the estimate, late payment interest will be charged on the difference at HMRC’s standard rate (currently 3.25% per annum but due to decrease from 30 March 2020).  

There are certain exceptions from reporting, such as:

  • Disposals giving rise to a capital loss.
  • Disposals where the gain is fully covered by a relief or by a brought forward capital loss.
  • Disposals where the gain is within the annual exemption.
  • Disposals at nil gain/nil loss, such as transfers between spouses.

Non-UK residents

The requirement for non-UK resident individuals and trustees to report a disposal of a UK residential or commercial property within 30 days of completion will continue after 5 April 2020. There are no reporting exemptions and HMRC will expect a UK land return to be filed even if the disposal does not give rise to a tax liability.

The main change for non-UK resident individuals and trustees will come in the form of a requirement to pay the estimated CGT within 30 days of the completion. Once final liability is known, there will be an option to amend the UK land return or, if the taxpayer is within self-assessment, the final CGT positon will be reported on the self-assessment tax return. Again, if the final CGT liability is greater than the estimate, late payment interest will be charged on the difference at HMRC’s standard rate.

Penalties

As with any tax filing and payment obligations, HMRC will levy late filing penalties in the case of non-compliance and late payment interest will be charged at HMRC’s standard rate.

Closing thoughts

The calculations of capital gains and the estimating of the capital gains tax can be complex and may require valuations. Therefore, taxpayers are advised to contact their tax advisers as soon as their property goes on the market to ensure a timely filing.