Back in April, a rule requiring capital gains tax on additional UK residential property to be reported and paid to HMRC within 30 days kicked in.
More than eight months on and we’re surprised at how many people, particularly buy-to-let landlords, are unaware of this tax change.
It’s not just those with residential property portfolios; second homeowners and accidental landlords are in the firing line, too.
If you made a taxable gain from the sale of additional UK residential property in 2020/21, any tax owed needs to be reported and paid within 30 days.
The clock starts ticking as soon as you put pen to paper and formally complete the transaction.
Failure to do so can result in penalties and interest on any late-paid tax, so it’s worth being in the know about this change to the rules.
How does the 30-day rule work?
Before 6 April 2020, any tax owed was at the end of the following tax year, often between 10-22 months after the sale was completed.
For example, if you sold an additional property in Loch Lomond on 1 January 2020, you have until 31 January 2021 to pay any tax you owe on the gain. In total, that’s just shy of 13 months.
If the sale of that additional property was to go through on 1 January 2021, however, the deadline would also be 31 January 2021 – as you have just 30 days to report and pay any capital gains tax owed.
Paying within 30 days
To report and pay any tax due within 30 days of the completion date, an online capital gains tax disposal return needs to be filed. You can do this yourself or it’s something we can take care of on your behalf.
This is treated as a ‘payment on account’ of the capital gains tax for the tax year. In calculating any tax due, we are able to offset capital losses already incurred at this point.
It also needs to be reported on the relevant self-assessment tax return as it goes towards your final capital gains tax liability on all asset disposals made in the tax year.
How to report
Firstly, a capital gains tax on UK property account needs to be set up on HMRC’s website. This provides the facility to report the disposal, pay any tax due, and amend any previous returns.
Once set up, the online capital gains tax disposal return needs to be completed within 30 days of completion if any tax on gains from additional residential property disposals arises.
Just be aware that if you do decide to complete your own online capital gains tax disposal return, late-filing penalties apply if you fail to file within 30 days.
How can we help?
At Thomas Barrie, we can report any disposal on your behalf to ensure you comply with the new rules. You need to specifically authorise us to do so via our agent services account as existing 64-8 forms do not cover this.
For more information, you can read more about our personal tax planning services. Alternatively, email us at contact@thomasbarrie.co.uk or call us on 0141 221 257.