If you are tax resident in the UK

If you are UK tax resident and you sell residential property in the UK on which there will be Capital Gains Tax (CGT) to pay, then you must report this sale to HM Revenue and Customs (HMRC) within 60 days of the completion of the sale and must also pay the CGT within 60 days of completion. This report is made by filing a special online return through a Capital Gains Tax on UK property account.

A residential property is a flat, house, or other property which is for living in.

You do not need to report the sale through this 60 day reporting regime if there is no tax to pay – for instance:

• if the property was always your principal private residence (main home) and you hadn’t made an election for another property to be treated as principal private residence.
• or if you have made a loss on the sale of the property.
• or if you have no earlier CGT disposals in the tax year and the gain on the property will be covered by the annual CGT exemption (reduced to £6,000 from 6 April).

If you normally file a self-assessment tax return, then the sale will also still have to be included in that tax return.

If you are tax non-resident in the UK

If you are claiming non-residence for UK tax purposes, for instance because you are working full-time overseas for an extended period or because you have returned to your home country or have retired overseas, then you also have to file a 60 day CGT return and if you sell a UK residential property.

The requirement for non-residents is more stringent in that the return must be filed regardless of whether any UK CGT is payable.

Disposal by gift

A disposal by gift is also subject to CGT and these reporting requirements but with the added disadvantage that there may be no money to pay the tax.

Common misconceptions

The solicitor dealing with the property sale will deal with this – Not True

Not only is the 60 day CGT return not part of the service provided by the conveyancing solicitor, it is likely that they won’t even mention the requirement for such a return.

If I move into my rental property for a few months before the sale, that will make it a CGT free principal private residence – Not True

Where a property has been used as your home for part of the period of ownership and as a rental for part of the period of ownership, the capital gain is time apportioned between the two periods and taxed accordingly.

If I am living overseas, I don’t need to worry about UK taxes – Not True

Even if you have left the UK with no intention of ever coming back, then you are still likely to be subject to UK tax on UK based income and capital gains.

What does this mean for me?

If you are planning the sale of a UK residential property which has been a rental or second home, tell your accountant / tax adviser in advance that a sale is planned so that they can tell you how to set up the special Capital Gains Tax on UK property account, what information you need to collect together to calculate the gain and prepare a draft CGT calculation for you if you wish.