UK residents that sell a UK residential property, need to report this disposal to HMRC and pay the capital gains tax within 60 days.
This applies when your residential property is not your main place of residence and therefore is classed as an ‘asset’ by HMRC. An example of this is a second property that you own have rented out but have now sold.
These rules also apply to gifts of properties and non-UK residents that sell any form of UK land.
Once a disposal has taken place, it is necessary to complete a calculation to determine the level of the gain that has occurred.
In some circumstances, there is no gain after all available reliefs have been deducted.
If this is the case, then a 60-day report is not required as there is no additional tax due.
However, the only way to determine if the additional reporting requirements are due, is to complete calculations for the disposal.
If a gain has been calculated on the disposal, it will be taxed after your other sources of income in the tax year. This will be at either 18% or 24% depending on the level of income in the year.
Reporting the gain and the subsequent tax will be made through a separate capital gains HMRC portal within 60 days of the disposal. Depending on the time of the disposal, it may not be possible to determine accurately your level of income for the year. If this is the case, estimated figures can be used until more information becomes available and the report will need to be amended.
Finally, the disposal will also be included on your end of year self-assessment to ensure that the correct level of tax has been collected.
If a property disposal has not been disclosed, to HMRC the financial penalties will be levied, and interest will be charged on underpaid tax.