Capital Gains Tax on Property – the 60-day rule for residential property
Capital Gains Tax on Residential Property is charged at different rates than other assets (currently 18 or 25%). Furthermore, is now a requirement to report and pay any taxable gains on residential property in the UK within 60 days of the completion of a sale. This 60-day period was extended at the Autumn Budget 2021. Previously, a 30-day obligation came into effect on 6 April 2020.
Capital Gains Tax is potentially payable on any gain made from the disposal of a property. As well as a sale, disposals can also mean gifting a property or transferring it to someone else, other than a spouse or civil partner. You generally do not need to pay this on your own home. (Unless you have rented it out or other conditions apply). An annual allowance (£3,000 for the tax year 2024/25) may also apply for UK residents.
Examples of property that is liable for Capital Gains Tax include the sale of commercial property, residential buy to let property and the sale of second homes or holiday homes. You may also be liable if use part of your own home commercially or let part of it out. For UK residential property, any taxable gains must now be reported and paid to HMRC within 60 days of the completion of the sale.
60-day capital gains tax payment warning
For UK residential properties sold on or after 27 October 2021, Capital Gains Tax needs to be reported to HMRC and paid within 60 days of completion of a sale. Failure to do so may lead to penalties and interest charges. (For the period 6 April 2020 through to 26 October 2021, the requirement was to report and pay the gain within 30 days of a sale). For disposals before 6 April 2021, any capital gains should have been reported in an annual Self Assessment Tax Return. The latest these should have been reported is within a 2019/20 Self Assessment. These were due on 31 January 2021.
Many sellers and their legal advisers appear to be unaware of these rule changes. We are seeing many cases of individuals who contact us retrospectively on this matter. Here they have often been subjected to late filing penalties.
For those who are required to report a capital gain within 60 days or a sale, they are often subsequently required to submit a Self Assessment Tax Return for the year in which the sale occurred. Essentially the initial payment is a payment on account and the subsequent Self Assessment Tax Return ensures the correct amount of tax has been paid in the tax year.
Paying capital gains tax on property
The rate of capital gains tax on residential property is higher than you would pay on other assets. Higher rate and additional rate taxpayers are liable at 28%. Whilst basic rate taxpayers are liable at 18% (and then 28% for any gain that takes them above the basic rate band).
What is the Capital Gains Annual Allowance?
Most UK taxpayers have a Capital Gains Annual Allowance. This means they can usually earn a certain amount free from Capital Gains Tax.
For the 2024/25 tax year this is £3,000. This means you can make gains of up to £3,000 from the disposal of assets, before being liable to pay capital gains tax. Married couples and civil partners who jointly own assets can each use their allowance. This potentially allows for tax-free gains of £6,000.
If you have already disposed of any other assets liable for Capital Gains Tax in the same tax year as you dispose of a property, this is likely to reduce the remaining annual allowance available to be offset against a capital gain arising from the subsequent disposal.
You can find more information on our main Capital Gains Tax page.
Capital Gains Tax on second homes
When a second home is sold, it will usually be liable for capital gains tax. You may be able to claim relief if the property was once your main residence. However, this could also affect the tax liability of your current main residence. In this situation, professional advice should be sought on what you can elect as your main residence, as this could affect your tax liability.
Calculating capital gains tax on property
Before you can report a capital gain, you will need to calculate it. This will require the following for each property:
- Confirmation of the purchase price and sale price
- The dates in which you purchased and disposed of the asset(s)
- Any allowable costs, such as renovation works, stamp duty, legal and other professional fees associated with the sale and disposal.
- Confirmation of any applicable tax reliefs you are eligible for
Reporting a capital gain on residential property to HMRC
You will need to sign up for HMRC online services to report the gain. This is free and you can set an account up here.
Where residential property was sold before 6 April 2020, this should have been reported at the latest in your 2019/20 tax return, which was due on 31 January 2021. If this is still outstanding, you should file this a soon as possible, as the penalties and fines for a late payment can be substantial.
Reporting and paying a capital gain if you are not a UK resident
If you are not a UK resident, the sale of all UK property must be reported to HMRC within 60 days, even if there is no tax to pay. If tax is due, this should be paid within 60 days also.
How Alexander & Co can assist you
At Alexander & Co, all our tax accountants are fully certified, to ensure we provide expert advice. this helps to reduce your tax liability as much as possible and keep you on the right side of HMRC.
We offer a complimentary initial consultation to discuss your personal circumstances.
Should you need advice on calculating your capital gains tax liability, filing your tax return or negotiating with HMRC we can assist. We are happy to provide a fee quote to advise. We work with a wide range of clients across the UK. These include individuals, through to incidental landlords, buy to let investors and larger investors and developers.
Contact Us
For further information, please contact our expert tax team at Alexander & Co. We will be more than happy to provide a fee quote to assist you. Please contact us using the form on this page or email info@alexander.co.uk
