CGT Return (60-days)

From 6 April 2020, the government brought new rules on reporting and paying the Capital Gains Tax (CGT). Under this new regime, you have to report and pay the capital gains tax on UK residential property within 60 days after selling the property. In addition, the Capital Gains Tax (CGT) return has to be filed using the new HMRC digital service.

Who will need to submit the CGT Return within 60 days?

Generally, the 60-day CGT return rule applies to the taxpayer who usually complete their personal tax return, which includes: 

  • Individual taxpayers
  • Joint owners of the residential property
  • Partners in general partnership and limited liability partnership (LLP)
  • Trustees of a trust

What types of property sales fall within the scope of a 60-day CGT Return?

Disposal of the UK residential properties fall within the scope of a 60-day CGT Return, which generally includes the following: 

  • Buy-to-let residential property
  • Holiday homes or second home
  • Residential properties you partly lived as a primary residence or never lived as your primary residence
  • House of multiple occupations

What types of transactions fall within the scope of the 60-day CGT return?

Any disposal of UK residential properties falls within the scope of the 60-day rule. The disposal can take the following forms: 

  • Sale
  • Gift
  • Grant of lease out of residential properties
  • Transfer via deed or declaration of Trust
  • Transfer via any other means

What types of disposal fall outside the scope of the 60-day CGT return?

The 60-day CGT return rule applies only for the direct disposal of UK residential properties where there is a capital gain. Following are outside the scope of 60-day CGT Return: 

  • Disposal of commercial properties
  • Disposal of overseas residential properties
  • Disposal of residential properties by companies
  • CGT neutral transfers between spouses 
  • Capital gains covered by an annual exemption limit of £12,300
  • Capital gains fully covered by primary residence relief
  • Disposal of residential properties at a loss
  • Indirect disposal of UK residential properties (e.g. shares of a company owning UK residential properties)
  • Grant of a lease for no premium to unconnected parties at arm's length
  • Disposal by special entities like charity, pension funds, etc.
  • Disposal of UK residential properties which is classified as trade and taxable under income tax rules (e.g. gains by property developer or trader)

From what date does my 60 days deadline for CGT return and CGT payment start?

The deadline of 60 days starts from the date of the completion. Please note that the 60-day rule is the date of the completion, not the date of exchange (although the date of exchange is relevant to determine the effective date of sale of the property and taxes for CGT).

The date for the payment is also the same as for the return as above. 

Late filing penalties together with interest may be charged by HMRC for late returns and payment. 

What is the rate of CGT applied to calculate my CGT?

The normal rate of CGT for residential properties is 18% for basic rate taxpayer (total income up to £50,000) and 28% for higher and additional rate taxpayer. Also, a CGT annual exemption of £12,300 per tax year is available.

As a CGT return needs to be filed within 60 days of disposal, you generally may not know the true picture of your tax bracket to accurately determine the CGT rate. So, you will need to make a reasonable estimate of your other taxable incomes in the tax year to determine your applicable CGT rates. If your estimates are reasonable, you generally would not face penalties for an inaccurate 60-day CGT return (but we advise you to keep evidence on how you arrived at your reasonable estimate).

However, if you don't file a self-assessment return, you will need to file an amended CGT return to correct your errors when it is reasonable to make a different estimate of your income. If you do file a self-assessment return, it will be taken care of as you would include your CGT in your self-assessment return.

Do I need to file a Self-Assessment return if I declare my CGT under the 60-day CGT reporting requirements?

If you filed your CGT return under the 60-day rule and you don't have any other reason except the disposal to complete a self-assessment return, you don't need to file and report the gains via a self-assessment return. However, if you complete your Self-Assessment return, you MUST include the capital gains again in the self-assessment return.

What happens if I complete my Self-Assessment return before the deadline of the CGT return?

If you complete your Self-Assessment return and disclose the gains in your self-assessment return, then you usually 'don't need to complete the CGT return and pay the CGT within 60 days. This would be possible for near tax year-end disposals.

For example, if the complete date for the sale of a residential property is 25 March 2022, then you will not need to file the 60-day CGT return if you file it (including the disposal) before 25 April 2022.

What happens if the CGT reported on my CGT return turns out to be too high and overpaid?

If the CGT declared and paid via the CGT return is too high, you would be eligible for the repayment or to offset it against the self-assessment liability. The amendment of CGT is done via UK Property Accounts portal. The repayment can also be requested via the portal.

However, amounts overpaid in a year are not offset automatically via the Self-Assessment tax return because of a limitation in ' 'HMRC's systems. The taxpayer or their agent should contact HMRC by telephone on 0300 200 3300 to enable HMRC to make a manual adjustment of overpaid CGT in the self-assessment return.

What is the procedure for reporting the disposal to HMRC?

There is a new digital system to report the capital gains tax (CGT) under the 60-day rule. The taxpayer needs to set up a CGT UK Property Account by visiting the link Report and pay Capital Gains Tax on UK property. If you already have the government gateway credentials, you can use your existing login to sign in to the UK Property Account. For new users, you will need to set up the Government Gateway credentials first.

You will need to follow the process on the screen in the link above to create a CGT UK Property Account. At the end of the process, the system issues a 15-digit reference number in the format XYCGTxxxxxxxxxx or similar. You will then need to provide that reference number to UK Property Accountants if you are using us as your agent to file the CGT return. If you are the filing return yourself, you will need to fill the return online attaching the relevant computation and file it with HMRC.

What information do I need for the CGT return?

The following information is required before you complete the CGT return:

  • property address and postcode
  • the date you got the property
  • the date you exchanged contracts when you were selling or disposing of the property
  • the date you stopped being the property’s owner (completion date)
  • value of the property when you got it
  • value of the property when you sold or disposed it
  • costs of buying, selling or making improvements to the property
  • details of any tax reliefs, allowances or exemptions that you are entitled to claim
  • property type, if you are a non-resident
  • the estimated taxable income in the relevant tax year to determine the tax bracket
  • the details of any other disposals already made in the tax year to determine the tax bracket and availability of CGT annual exemption