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You’ve Sold a house – now what?

There are NEW RULES when selling a property – and “doing nothing” right now could cost you £1,600 in penalties, plus interest.

For as long as anyone can remember, gains realised when selling any assets have been dealt with when completing your annual Tax Return after the end of each tax year.

But then the government changed the goalposts. They now require property sales to be reported to them within just 60 days of the sale, plus any Capital Gains Tax (CGT) to be paid in full at the same time.

The 60-day CGT return

Whilst there’s no change to the total amount of tax you pay, it’s now due much earlier. And you could argue that paying the tax when you make the gain sounds fair enough.

The issue, however, is the gov’t has done a really bad job of publicising this. And, sadly, most conveyancers I’ve spoken to are staying tight-lipped about it, which is really poor form. They say “we’re not engaged to provide tax advice to clients”. I say “Absolute bollocks, you’re just being lazy! Taking ten seconds to say ‘you should speak to your accountant ASAP to see if you need to pay any tax on this’ is not the same as providing tax advice, you shirker”.

So the fallout is that we now have taxpayers coming to us after the end of the tax year, asking us to report their property sale (which happened up to 12 months ago), and we have to break the news that they should have done it at the point of sale, and are about to get a battering from HMRC’s penalty regime…!

The penalties

In addition to interest on the late payment of CGT, which might not be much at all, the penalty regime
for the late return is what can really sting. These work out at:

• £100 after 60 days
• £10 per day after 3 months (max £900)
• £300 after 6 months
• £300 after 12 months

Total penalties: up to £1,600.

Oh, and if this was a jointly-owned property, that penalty is per person!

As you’ll see below, just registering for the CGT return can take a few weeks, which eats into your 60-day window. So if you’re even thinking about selling a property, please start the registration process right away.

This won’t commit you to preparing a return (e.g. in case the sale falls through), and the 60-day clock doesn’t start until the completion date.

Get out of jail free!

As with most things in tax, there’s some escape clauses. Broadly you only need to complete a 60-day CGT return if there’s tax to pay.

So, if you’ve sold your property at a loss, there’s no gain, and no return due.

You’re also off the hook if the gain will be covered by the CGT Annual Exemption or Principal Private Residence Relief.

These new rules only apply to residential property – not land, commercial property or indeed any other assets.

But if none of the above apply, it’s time to complete a CGT Report….and soon!

Completing your CGT return

This is an entirely digital process. We’d recommend you engage a Chartered Accountant to do the leg work – including the tax calculations and, crucially, ensuring you take advantage of all potential allowances and reliefs.

But you as the taxpayer will need to create a Government Gateway and, within that, create a “Capital Gains Tax on UK Property Account”. Frustratingly, your accountant cannot start the process for you.

It’s bonkers, but there we are.

You’ll then need to authorise our access to your account. We find a Zoom call is the easiest way to show you how to do this – HMRC’s website isn’t what we would call “intuitive”.

Once we’ve got access to your account, we’ll take it from there. You won’t need to do anything else apart from approving your return and, of course, paying any tax.

THE COST OF GETTING THIS RIGHT

This blog is a general guide to the main things you need to consider when selling residential property. It’s not exhaustive, and everyone’s circumstances are different.

As you can see from the above, leaving it all until the end of the tax year (as has previously been the norm) is going to generate significant penalties and interest. Don’t put your head in the sand; our fee for dealing with a 60-day CGT return, is just £540 plus VAT.

That includes all the calculations around the proceeds/allowable costs, reviewing any potential exemptions and allowances due, and of course the whole CGT return rigmarole.

When it comes to your annual tax return, the disposal figures also need to be included on there too (regardless of whether there is tax due). If we’ve prepared your 60-day return, there’s no separate charge for the CGT element of your annual tax return.

If you were exempt from the 60-day reporting then our fee for preparing the relevant sections of your annual tax return for the property disposal is £360 + VAT.

It’s fair to say that our costs in Getting This Right are significantly lower than the costs in penalties and interest of Getting This Wrong.

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