Are you selling your buy-to-let property or second home?

The rules have changed over recent years, so here is what you need to know.

Capital Gains Tax on UK residential property now has one big practical rule: if you owe tax when you sell, you normally have to tell HMRC and pay it within 60 days of completion. That is a big change from the old system, where you could often wait until your next tax return.

When these rules apply

• They apply if you sell a UK home that is not fully covered by main residence relief, such as:
  • A buy-to-let or rental property
  • A second home or holiday home
  • A former main home where you only get partial relief (for example because you let it out for a while)
• If your only or main home is fully covered by main residence relief and there is no tax to pay, you usually do not need to make this special 60-day property report.
• Non-UK residents generally have to report UK property sales even if there is no tax to pay, so their obligations are wider.

The 60-day deadline

• For completions on or after 27 October 2021, you must:
  • Report the sale online, and
  • Pay the Capital Gains Tax within 60 days of the completion date.
• Completion is the day the sale formally finishes and you get the money, not the day you exchange contracts.
• For completions between 6 April 2020 and 26 October 2021, the deadline was 30 days.
• Before April 2020 there was no fast reporting rule; you just included the gain on your normal tax return later.

What you have to do

• Work out your gain, starting with:
  • The sale price
  • Minus what you paid for the property
  • Minus buying and selling costs (legal fees, estate agent, stamp duty, some improvement costs)
  • Minus any reliefs (like main residence relief for the time you lived there)
• Use HMRC’s online service for Capital Gains Tax on UK property to:
  • Create a property account
  • Submit details of the sale and the gain
  • Pay the estimated tax due
• If you sell more than one property in the year, you may need to make more than one report.

Contact The Small Business Service: we can help collate your costs to make sure you claim all allowable expenses, and provide the calculations for your return.

The link with your normal tax return

• The information from your UK property Capital Gains Tax return also needs to be declared on your SA100 Self Assessment tax return.
• When you complete your SA100, you can update the figures if your income or allowances turn out different from what you estimated for the 60-day payment, and any extra tax or refund is sorted out then.
• If you do not normally complete a tax return and your only issue is one taxable property sale that you have fully dealt with under the 60-day rules, you may not need to go into Self Assessment at all.

Why this matters if you sell

You no longer have months or a year to think about Capital Gains Tax after selling a rental property or second home: you must act within 60 days of completion.

Get in touch if you need advice on completing your UK property Capital Gains Tax return.