Capital gains tax changes self assessment taxpayers need to know

HMRC signals time is running out for anyone who sold a second home during 2019-20 to declare it on their self assessment tax return and pay the capital gains tax (CGT) that is due

HMRC is reminding taxpayers that they have until 31 January 2021 to declare any profit made from selling a UK residential property, which was not their main home, during the 2019-20 financial year.

Since 6 April 2020 there have been changes to how taxpayers declare and pay CGT. UK residents who dispose of a UK residential property that is not their main home and make a capital gain where there is tax to pay, should use the online service to inform HMRC and pay the tax due within 30 days of completion.

Non-UK residents disposing of UK land and property should also use the online service, regardless of whether there is a gain or not.

The new rules affect landlords or property developers selling on part of their residential property portfolio, or UK residents who sell a residential property that is not their primary home.

Karl Khan, HMRC’s interim director general for customer services, said: ‘The 2019-20 tax year is the last year UK residents will be required to pay the capital gains tax for the sale of properties as part of the self assessment process and we want to make sure they are aware of the new requirements.

‘We are making it easier for customers to pay any tax that is owed. UK residents, including property developers and landlords, should now use the online service to make any capital gains tax declarations immediately after selling a residential property.’

Taxpayers will still be required to inform HMRC of any CGT liabilities on their 2020-21 self assessment tax return, however, any payments that have already been paid will not count towards their annual tax return bill.

Anyone selling a UK property that is their main residence will not be affected.

Taxpayers will continue to complete their tax return as now for any other CGT declarations in the future. They will pay tax on any profit, above their tax-free allowance, when they sell:

  • most personal possessions worth over £6,000, apart from their car;
  • their main home if they have let it out or used it for business;
  • shares; and
  • business assets.

Time to pay arrangement

Self assessment taxpayers can set up their own payment plan to help spread the cost of their tax liabilities, up to the value of £30,000. They can use the self-serve Time to Pay facility to set up monthly direct debits.

Interest will be applied to any outstanding balance from 1 February 2021.

If the self assessment debts are over £30,000, or people need longer than 12 months to pay their debt in full, they may still be able to set up a Time to Pay arrangement by calling the self assessment payment helpline on 0300 200 3822.

To protect against identity fraud customers must verify their identity when accessing HMRC’s online services. They must have two sources of information including: credit reference agency data; tax credits; P60/payslip; and UK Passport.

From 6 April 2020, if someone does not report gains on property within the 30-day time limit they may be liable to a late filing penalty, and if the tax is not paid within the same time limit, they may have a late payment penalty and be subject to late payment interest.

Useful links:

Online service to report and pay capital gains tax on UK property

More info about the changes to declaring and paying CGT on GOV.UK.

Further information about self assessment

Zak Jakubowski |Reporter, Accountancy Daily [2019-2021]

Zak Jakubowski was a reporter at Accountancy Daily, published by ...

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