60-day Capital Gains Tax Reporting
As a property owner, it is important to be aware of the tax implications of disposing of your residential property.
The 60-day capital gains tax reporting requirement for residential property disposals is a crucial aspect of the tax system that all property owners should understand. It was implemented in 2020 (initially as a 30-day rule later relaxed to 60-day) and most people are not aware of this requirement.
In this article, we will provide a comprehensive overview of the 60-day capital gains tax reporting requirement and how it applies to residential property disposals.
What is the 60-day Capital Gains Tax Reporting Requirement?
The 60-day capital gains tax reporting requirement is a regulation that requires property owners to report the sale of any residential property situated in the UK to the HMRC within 60 days of the sale completion. They also need to pay the tax (or an estimate of that tax since in many instances the exact calculation can only be done after the tax is finished in April) at the end of this 60-day period. This requirement applies to all individuals or trustees who sell UK residential property for a gain, regardless of the amount of the gain. If the sellers are non-UK residents, they have the obligation to report even if they haven't made a gain and for every disposal of UK land not just residential property – which is not the case for UK residents.
Why is important to be diligent with this New Reporting?
Because there is little time to prepare the return and do the calculation of the tax, it is important to approach an accountant as soon as possible and not wait until the sale completion. For most returns in the UK, taxpayers are given ample time to prepare. This is not the case with this new reporting requirement. Please note that a specific registration process is required in order to file the return and unless you plan ahead, you will most probably miss the deadline and face fines. It's actually a good idea to have created a gateway ID ahead of time to speed up the registration process as this would be a prerequisite.
Key Factors to Consider When Reporting a Disposal
When reporting a residential property disposal under the 60-day capital gains tax reporting requirement, there are several key factors that property owners should consider. These include the following:
- The cost basis of the property, which is the original purchase price plus any capital improvements made to the property.
- The sales price of the property, including any commissions or closing costs paid.
- Any deductions available such as the annual allowance or the Principal Private Residence (PPR) Relief if you have lived in the property.
Exceptions
They are very few exceptions but it worth noting that in case a SA100 tax return is filed before the deadline for a 60-day capital gains tax return then this return does not have to be filed. Nor the tax to be paid (until the deadline for the tax payment in January the following year).
So, for someone who is disposing of property and who may be able to submit their tax return before a 60-day return is due, the benefit is to not only to avoid submitting a 60-day return but also to defer payment of heir CGT until January the following year.
Conclusion
The 60-day capital gains tax reporting requirement for residential property disposals is a crucial aspect of the tax system that all property owners should understand. By accurately reporting the sale of a residential property within 60 days, property owners can ensure that they are in compliance with the law and avoid significant fines and penalties. Taxpayers should also understand that this new reporting is not a replacement for the annual tax return but an addition. You need to do both the 60-day Capital Gains Tax Report but also a tax return at the end of the year where you report again the gain and do a proper calculation that takes into account all of the income for year (even if you would not have been required to do at tax return).
