Capital Gains Tax on House Sales


Did you know that if you sell a house, you may have to tell hMRC (and possibly pay tax) within 30 days? 


From 6th April 2020, if you sell residential property, a new law requires that you tell HMRC within 30-days of the sale completing and pay an estimate of any Capital Gains Tax (CGT).


A new tax return was created for this and there are penalties for failing to submit it (or for submitting it late). This is completely separate, and in addition to, any requirement to file a personal self-assessment tax return each tax year.


You only have to make a return if there is any Capital Gains Tax liability. That means that many people, who are simply “moving house” will not need to make a return as the sale of their main residence is normally exempt from tax. However, with many people having second homes, rental properties, having inherited properties etc, there are a great many people who this does affect.


And the problem is, most people don’t even know! From early experience, many estate agents and solicitors have not warned sellers about the possible need to file this return.


So, what might you have to do?


Firstly, it only applies to residential property sales (not commercial), and only if Capital Gains Tax might be due.


Next, you need to pull together information on when you bought the property, the cost, any improvements, and what you have done with the property over its life (occupied it, let it out, etc). Once you have this and along with the details of the sale, the capital gain and any tax (if appropriate) can be calculated.


A return must then be filed with HMRC within 30 days of the sale completion AND an estimate of the CGT has to be paid over at the same time. So be warned if you are committing the sale proceeds to something else, like another house purchase.


If you also fill out a personal self-assessment tax return each year or need to because of the sale, the details need to be repeated on that – the 30-day form does not change that. The 30-day form is separate and in addition to the self-assessment tax return.


This system has been in place for non-UK tax residents for a few years, but from 6 April 2020, it was extended to UK residents. It also includes trust funds and the estates of those that have died.


If you think this might affect you, contact us. We can help with both calculating the gain and/or making the return. As importantly, if you know friends or family that are selling, make them aware too. It is not HMRC’s aim to trip people up and generate penalties, but they will apply them, so the more people that know, the better!