Selling a property – Is there tax to pay? And when?

Where the property has not always been your main residence, for example where you have let this property out for a period, it is a second home or there is a proportion of business use there can be the added complication of potential capital gains tax (CGT).

Under the current rules when you sell a residential property and a gain arises which is subject to capital gains tax, the gain is calculated and any tax due is reported on your self assessment tax return and paid by 31 January following the end of the tax year in which the gain arose. This is all about to change.

From 6 April 2020 anyone who sells a residential property for a capital gain will be required to make a digital return to HM Revenue and Customs detailing the estimated gain and pay any capital gains tax due within 30 days of the sale completing. This can potentially bring forward the date of paying tax by up to 22 months!

Capital gains are not always straight forward to calculate especially where there have been property improvements during ownership, the property has been rented or used in a business. This can complicate the calculation of the gain. With the short time scale for calculating the gain it is advisable to take advice and start collecting this information as soon as the property is on the market. This will enable the Capital Gains Tax position to be considered in time and be prepared for the tax payment due.

Where the 30 day deadline is missed HM Revenue and Customs will charge interest on any unpaid tax and will issue penalties for late submission.

Your final capital gains tax position will be re-assessed after the end of the tax year in which the gain arises, when your personal tax return is prepared. Any further tax due is payable by 31 January following the end of the tax year.

The timing of your sale may also have an impact on the amount of tax you pay. Everyone has an annual CGT allowance so if you have already used your allowance for the year it may be worth delaying the sale until the following year in order to make use of next years allowance.

There are many aspects to consider when selling properties so take advice early and speak to your tax advisor.

Sarah Twist is an Associate at A C Mole & Sons Chartered Accountants; Sarah or Amanda Gunter Tax Partner can be contacted on 01823 624450.