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Capital Gains Tax

When am I required to report and pay Capital Gains Tax by?

As a result of the recent stamp duty holiday introduced by the UK Government in July 2020, there has been an increase in landlords and individuals selling or attempting to sell their properties.

Although landlords and other property owners, currently have up until 31st March 2021 to benefit from this scheme, there is something they should be mindful of when attempting to dispose of their assets – and that is Capital Gains Tax.

What had not been commonly known up until recently, is that if a taxable gain is made by a UK resident when they sell or gift a UK residential property to another person, they will now be obligated to report and pay any Capital Gains Tax (CGT) within 30 days of the transaction being completed.

What is Capital Gains Tax?

CGT is a tax which is incurred by a person when they sell or dispose of an asset which has increased in value.

The amount of CGT a person is required to pay will depend on the sum gained and the rate at which a person pays income tax (i.e basic rate or higher rate tax payer).

CGT must be reported and paid by a person to HMRC if a gain is made when they sell or dispose of the following;

  • A property which is not used as their main home
  • A holiday home
  • A property which is let out for people to live in
  • A property which is inherited which is not used as their main home.

When must Capital Gains Tax be paid by?

UK residents who either sell or gift a UK residential property to another person are now required to report and pay any CGT within 30 days of the transaction being completed.

Previously, UK residents had up to 22 months to report and pay any CGT due.

The new deadline has been in place since April 2020, however many conveyancers, estate agents and tax professionals were not aware of the implications of the rule change until recently, as it was not widely publicised.

What penalties could I incur if I report or pay my Capital Gains Tax late?

Reported: Paid:
Within 30 days £100.00 Fine HMRC will impose an initial fine of 5% (of the value of the CGT) onto your CGT bill.
Within 3 months Daily fine of £10.00 charged (can be increased up to a maximum of £900.00) N/A
Within 6 months HMRC will add a further 5% (of the value of the CGT) to your CGT bill or a charge of £300.00 if this proves to be greater. HMRC will impose a further fine of 5% (of the value of the CGT) onto your CGT bill.
Within 12 months HMRC will add a further 5% (of the value of the CGT) to your CGT bill or a charge of £300.00 if this proves to be greater. HMRC will impose a further fine of 5% (of the value of the CGT) onto your CGT bill.

Contact

If you require assistance selling property or require advise on any other property matters, please do not hesitate to contact our team on 0191 232 9547.

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