Are you prepared?
It is currently tax return season, the annual deadline is fast approaching, and we are taking on a number of clients that need their returns filed at the last-minute.
One issue we are noticing that is catching people unaware this year is Capital Gains Tax (CGT) on property. You will usually be taxed on the sale of a property if it is a second home or a buy-to-let property, or if you have let out part of your main residence. This will also apply to the sale of commercial premises, land and inherited property.
Furthermore, if you sell a property that you haven’t lived in for the whole period of ownership, and it has increased in value, then you’ll need to pay Capital Gains Tax at either 18% or 28%. Basic rate taxpayers will be taxed at the 18% rate, while higher and additional rate taxpayers will be taxed at 28%. As the gain is the top portion of your income, it is possible for some of the gain to be taxed at 18%, while the remainder will be taxed at 28%.
How is CGT reporting changing?
You used to be able to report this on your annual tax return, but for investment property, you now need to report it and pay any tax due within 60 days to avoid receiving fines and penalties. Not all conveyancing solicitors are highlighting it at the point of sale, so it is important that landlords and property investors are aware of their requirements.
Moreover, unless you qualify for an exemption which means you are not required to use digital technology, you are expected to make your CGT return and payment online via HMRC’s government gateway. If you don’t have a government gateway account, you should apply for one. This process can take up to 10 working days, so you will need to consider this when preparing to file. You will also need certain details to fill in the required paperwork which should be collated beforehand to ensure there are no delays.
As always, if you would like any further information regarding the above, please feel free to contact our offices by email email@example.com.