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In this blog, we will provide an overview of the current requirements for reporting and paying CGT on Residential Property sales. For most assets, Capital Gains Tax is charged at a rate of 10% higher-rate tax payers pay 20%.
when it comes to property disposals things are a little different. In the UK gains made on property disposals are charged at a higher rate when compared to other assets. Basic rate taxpayers currently pay 18% on property-related gains and higher/additional rate taxpayers pay 28%.
CGT Allowances for Residential Property Gains
Every person who pays taxes is allow to a £6000 annual capital gain tax allowance for the tax year 2023/2024. For married couple who jointly own property the combined allowance is £12,000. This reduces the total taxable gain on property disposals helping minimise tax liabilities.
When is CGT Payable on Residential Property Gains?
Every person who pays taxes is allow to a £6000 annual capital gain tax allowance for the tax year 2023/2024. For married couple who jointly own property the combined allowance is £12,000. This reduces the total taxable gain on property disposals helping minimise tax liabilities.
PPR Relief: When Does It Apply?
Under the Principal Private dwelling (PPR) exemption homeowners can avoid paying CGT on their primary dwelling. For PPR eligibility the following requirements must be met:
- The property must be your main residence.
- PPR applies to the house and up to 0.5 hectares of gardens.
- Larger grounds may also be included if deemed necessary for the reasonable enjoyment of the property.
When is CGT Payable on Residential Property Gains?
CGT is payable on:
- The sale of second homes.
- The sale of investment properties (e.g., rental properties or holiday homes).
- Any commercial elements will also be excluded from the permitted area (such as holiday lets or agricultural land utilised in conjunction with a grazing licence).
Changes to CGT Reporting Requirements
From 27th October 2021, HMRC introduced new reporting requirements:
- 60-Day Reporting Deadline: Residential property disposals that incur CGT must be reported to HMRC within 60 days of the sale’s completion date.
- CGT Payments: Payment of CGT must also be made within the same 60-day window.
- If you have multiple property disposals, each transaction must be reported individually within this timeframe.
Exemptions from the 60-Day Reporting Rule
- The new 60-day reporting requirement does not apply if:
- The property sale qualifies for PPR relief.
- The gains are within the annual CGT exemption (£6,000 per individual). The property is an overseas residential property, and the gains are taxed on the remittance basis or subject to double taxation relief.
Using CGT Losses to Offset Gains
The amount of Capital Gain Tax owed can be low if you have record CGT losses in the past and use them to offset any profits on residential real estate.
How IBISS & CO Can Help
If you are planning to sell residential property in the near future and think that the changes will affect you. Do not hesitate Contact with IBISS & CO. Our experienced team will perform an in depth review of your current position and ongoing plan making sure that you take advantage of all possible reliefs whilst ensuring compliancy in 2024 and beyond.
