Selling residential property? Note reporting changes to avoid a penalty
Up to and for the 2019/20 tax year, Capital Gains on residential property was calculated and reported as a disposal to HMRC after the end of the tax year via self-assessment. From 6th April 2020, all gifts or sales of UK residential property must be calculated, reported and must pay an estimate of the capital gains tax liability within 30 days from the date of completion.
This ‘in-year’ reporting is a big change and requires taxpayers to use special rules to determine their estimated CGT liability before the end of the tax year. This should be noted particularly if you are a landlord or second-home owner. Since most taxpayers are used to tackling tax on an annual basis via self-assessment, this extra in-year report within 30 days will place significant time pressure on all involved.
While HMRC did allow for a penalty-free ‘transition' period, this applied to disposals which took place in the first three months of the 2020/21 tax year (April to June). Those who miss the deadline after that time without a reasonable excuse will find themselves liable to a £100 fine. 13,113 people got such a shock in the last six months of 2020, as HMRC issued fines worth over £1.3m to those who had missed the new deadlines.