You sold your house and moved to a new one a few weeks ago, you thought all of the paperwork was complete, but someone tells you that you now need to tell HMRC about the sale or face a fine. Are they right? Property expert Wendy Noble provides the answer.
The rules for reporting the sale of residential property changed on 6th April 2020. Since then individuals are required to send an online report and pay any tax owing using HMRC’s special online service no later than 30 days following the completion of the sale of their home or other residential property. HMRC can fine you for not complying but the good news is that there are many situations where a report isn’t required.
No report needed
The rules only require you to report a gain within 30 days if there is capital gains tax (CGT) to pay and any tax payable must be paid no later than the end of the 30-day period. This means you won’t need to report if the gain liable to tax is less than your capital gains annual exemption (£12,300 for 2020/21). To reach the gain liable to tax you deduct any CGT reliefs you’re entitled to, e.g. private residence relief (PRR).
Exceptionally, where a non-resident disposes of UK property, even where there is no tax liability arising, a 30 day CGT return must be completed, however this blog article focuses only on UK residents.
If a property has always been your only or main residence, except for relatively short periods of absence, and has not partly been used for business purposes, PRR will reduce your gain to zero so no report is required.
Other reliefs can also reduce a gain so that no CGT is payable and therefore no report is needed. For example, enterprise investment scheme deferral relief, holdover relief, capital losses carried forward from earlier years and those made between the start of the tax year and the date you exchanged contracts on the sale of your home or other residential property. If the relief reduces the gain but there’s still CGT payable, you must make a report and pay the tax.
The 30 day reporting rules can also apply if you give away or sell a property at a price less than the full market value. For example, if you gave a share of a property to a son or daughter. However, this doesn’t apply to a gift or sale at undervalue to your spouse or civil partner.
The self-assessment exception
There is one final exception to the reporting rules. It applies where you make a gain from the sale of your home on which CGT is payable but you’ve already declared the transaction on your self-assessment tax return and paid the tax. For example, no report would be required if you exchanged contracts in February 2021, completed on 1 May and submitted your self-assessment tax return for 2020/21 and paid the CGT owing on 20 May. The 30-day deadline falls on 31 May 2021, i.e. after you submitted your tax return.
Originally, it wasn’t possible to amend your CGT report online but HMRC added this service in October 2020.
You must report the sale of your home or other residential property to HMRC within 30 days of completion using its special online service. You don’t need to do this if there’s no capital gains tax (CGT) payable, for example, because private residence relief or other tax reliefs or deductions reduce the gain below your annual CGT exemption.
If you’re not sure how to work out if you owe CGT or how much, please do get in touch with one of the team at JRW, we can also make the report on your behalf. But remember the 30-day deadline applies so you need to get information to us in reasonable time.