Introduction
When it comes to selling or disposing of a UK residential property, it is important to understand the tax obligations that come with it. One such obligation is the reporting of Capital Gains Tax (CGT) within 60 days of the disposal. In this guide, we will walk you through the process of reporting CGT and provide you with the necessary information to ensure compliance with the UK tax regulations.
What is Capital Gains Tax?
Capital Gains Tax is a tax that is applied to the profit made when selling or disposing of an asset that has increased in value. In the context of UK residential property, CGT is applicable to any gains made on the sale or disposal of a property that is not your main residence.
Reporting CGT within 60 days
As of April 6, 2020, individuals who sell or dispose of UK residential property are required to report and pay CGT within 60 days of the completion date. Failure to do so may result in penalties and interest being charged.
To report CGT within the 60-day window, you will need to follow these steps:
- Calculate your capital gains: The first step is to calculate the gain or loss made on the disposal of your residential property. This can be done by deducting the acquisition cost, allowable costs, and any reliefs or exemptions from the sale price.
- Register for a Capital Gains Tax on UK Property account: In order to report CGT, you will need to register for a CGT on UK Property account with HM Revenue and Customs (HMRC). This can be done online through the government’s website.
- Report the gain and pay the tax: Once you have registered for a CGT on UK Property account, you can proceed to report the gain and pay the tax owed. This can also be done online through the government’s website.
- Keep records and documentation: It is important to keep records and documentation related to the sale or disposal of your property, as well as any calculations made for CGT purposes. These records may be requested by HMRC for verification purposes.
Who is required to report CGT?
Any individual who sells or disposes of a UK residential property that is not their main residence is required to report CGT within 60 days. This includes:
- UK residents selling UK residential property
- Non-UK residents selling UK residential property
- Trustees or personal representatives selling UK residential property
Exemptions and reliefs
There are various exemptions and reliefs available that may reduce or eliminate the amount of CGT payable on the disposal of a UK residential property. Some common exemptions and reliefs include:
- Principal Private Residence Relief: This relief may apply if the property being sold or disposed of was your main residence at some point during your ownership.
- Business Asset Disposal Relief (BADR): If the property qualified a furnished holiday let (FHL), the capital gains may be due at a lower rate of tax.
- Annual Exempt Amount: Each individual is entitled to an annual capital gains exempt amount, which is the amount of capital gains that can be made in a tax year before CGT becomes payable.
What to do next
Reporting Capital Gains Tax within 60 days of the disposal of a UK residential property is a crucial obligation for individuals who are subject to CGT. By following the steps outlined in this guide and understanding the exemptions and reliefs available, you can ensure compliance with UK tax regulations and avoid penalties or interest charges.
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