The frequently asked questions about Capital Gains Tax 30 days reporting and payment
You may be interested in our main article on Capital Gains Tax rates and allowances. You may also be interested to know how more about our services to help reduce your Capital Gains tax liability when you sell a buy to let property investment.
As property accountants, we are regularly asked questions about Capital Gains Tax reporting within 30 days when you sell a residential buy to let property or a home that you may have moved out of.
– What types of assets do you need to report a Capital Gains to HMRC?
– What happens if I do not report a Capital Gain?
– How do I complete a CGT return?
– When should CGT be paid?
– Do I pay Capital Gains Tax if I sell my house?
Why you may be paying too much Capital Gains Tax
Our property tax specialists help over 1,000 of monthly retained UK landlords and property investors to work out how much Capital Gains Tax there is to pay before they sell a residential property investment.
There are many reasons why people pay far more Capital Gains Tax than they need. This is because
– They do not know what they do not know.
– They have not spoken to a tax specialist to go through their situation to see what available tax reliefs are available to them.
– Their accountants or solicitor are not aware of the many reliefs that are available to their clients and are not taken advantage of.
– Tax legislation changes but either the person or their accountant / tax specialist have not been made aware
– They have not taken advantage of the CGT annual exemptions within the husband/wife/civil partnership
Capital Gains Tax when selling a buy to let
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Understanding the basics of 30 days reporting a CGT to HMRC
As property accountants serving thousands of UK landlords that purchase buy to let properties, we know that you may need to pay capital gains tax (CGT) if you sell something for more than what you paid for it. This is particularly relevant to buy to let houses.
In 2018/19, the total Capital Gains Tax liability was £9.5 billion for 276,000 taxpayers. This CGT liability was £62.8 billion of chargeable gains. The total CGT liability and gains increased, but the number of taxpayers decreased.
The South East of England had the highest number of capital gains taxpayers, followed by London. These two regions account for 40% of individuals who were liable to CGT in the UK in 2018-19. The North East of England and Northern Ireland had the fewest taxpayers.
People aged between 55 to 64 have consistently had the highest number of capital gains, followed by those aged 65 to 74 and 45 to 54 age categories. These three age groups represent 71% of the CGT population.
I wonder how many of these taxpayers paid more CGT than they needed to because they did not discuss their scenario with a property tax specialist.
From 6th April 2020 individuals, trustees and personal representatives of deceased persons who sell or dispose of residential property must report the disposal to HMRC within 30 days of completing the disposal, where a taxable gain has been made. The tax payer in question must also make a payment on account of the CGT due.
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What types of assets do you need to report a Capital Gains to HMRC?
Imagine that you sell an item for more than you paid, the difference is your capital gain. You will need to submit a report to HMRC within 30 days of disposal If the assets which has a gain is a residential property.
You will also need to submit a personal self assessment tax return to HMRC to show the gain and CGT associated with it.
If you are married or in a civil partnership you will need to complete the 30 day report per person and submit a personal self-assessment tax return to HMRC.
Please note that a taxable gain will only exist where you have exceeded your annual exemption for the year.
Even if your capital gains are less than £12,300 for 2020/21, you will need to complete the appropriate capital gains pages of your personal self-assessment tax return.
In some instances, however, you’re not required to comply with 30 day reporting. For example, the 30 day reporting rule doesn’t apply if you’ve already disclosed the disposal using the self-assessment tax return. In this case, there’s no need to file the 30 day reporting paperwork.
Who pays CGT and when is it paid?
The tax payer making the taxable gain is required to submit the 30 day reporting to HMRC. At the same time that same taxpayer will also need to pay capital gains tax liability within 30 days of the completion of the sale.
How do I complete a CGT return?
It is important for me to repeat and stress that each member of a husband/wife/civil partnerships needs to submit a 30 day CGT return to HMRC and make payment. This CGT 30 day reporting and payment may be done online using HMTCs online system.
Avoiding CGT late filing penalties and payment penalties
CGT rules change often. It is important to know how and when to report capital gains tax correctly.
There are different ways to report UK residential properties sold since 6th April 2020. Likewise, there are various ways to report UK residential property sold before 6th April 2020, namely the self assessment tax return that needs to be filed by 31st January each year.
You will need to make a capital gains tax computation for each gain or loss that you report. Here is where you’ll find that accurate record keeping is your best ally. In some instances, you can also use our CGT calculator to identify the tax liabilities.
There are many elements of detail that you will need to obtain when submitting the CGT computation to HMRC within 30 days of disposal:
– Date of original purchase and sale of an asset
– Capital purchase costs and legal fees associated
– Sales price less any agency and legal fees
– Capitalised costs during the holding period of the asset
– Any CGT reliefs that are open and available to you
It is important to comply with the 30 day reporting rule when selling UK property. If you fail to do so, you may find that you’re subject to penalties and interest.
If you are a non-resident and sell a UK property, you must still report the asset disposal within 30 days. This 30 day CGT reporting rule applies to non-residents even if you do not owe capital gains tax.
What if the 30 day reporting of Capital Gains Tax is incorrect?
You should have all the relevant information when you sell a buy to let property when submitting your CGT 30 day report. However, more information may arise when you are submitting your personal self assessment tax return.
You will have more tax to pay on 31st January if it is found that you owe more CGT to HMRC than you originally disclosed and paid in the 30 day report.
Equally, you are likely to get a tax credit on your personal self assessment tax return if you have over paid CGT to HMRC on the 30 day reporting.
Do I pay Capital Gains Tax if I sell my house?
You do not need to pay Capital Gains Tax if you sell your home. This is provided that you lived in the home from the point of purchase to the point of sale. This is because you can claim Private Residence Relief. The PRR relief when selling a property reduced for the time that you have not lived in the house as a home.
Saving on Capital Gains Tax
There are many ways in which you can either reduce Capital Gains Tax or avoid CGT altogether. There are some ways that you can save on CGT.
As an example, you do not typically pay capital gains taxes for gifts to your spouse or civil partner. Likewise, you usually do not have the pay capital gains taxes on contributions to charity.
There also some assets that are not subject to capital gains tax. For instance, you do not have to pay capital gains taxes on UK guilds and premium bonds. You are also not required to pay capital gains taxes on lottery and pool winnings.