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Nov 10, 2021

Tax reporting deadline for additional property sales extends

Buy-to-let landlords and second homeowners have twice the amount of time to report and pay capital gains tax after selling a residential property in the UK.

The deadline to report and pay capital gains tax after completing the sale of additional UK residential property is now 60 days - up from 30 days.

The change came into immediate effect after the recent Autumn Budget, and applies to completions made on or after 27 October 2021.

This extension also applies to non-UK residents disposing of any type of property in the UK, whether directly or indirectly owned.

When mixed-use property is disposed of, the 60-day payment window will apply only to the residential element of the property gain.

Previous controversy

On 6 April 2020, the 30-day payment window was introduced with surprisingly little fanfare. In fact, very few taxpayers knew about it at all.

This could affect buy-to-let landlords, second homeowners or those with holiday homes, and accidental landlords. That remains the case now.

If one of these taxpayers sold up and made a taxable gain, any capital gains tax owed had to be reported and paid within 30 days.

Before April 2020, any tax owed was due at the end of the following tax year, usually between 10-22 months after the sale was completed.

Implementing a recommendation

The extension implements a specific recommendation contained in a report published by the Office for Tax Simplification (OTS) in May 2021.

It claimed that many taxpayers only found out about their capital gains tax obligations after they had completed the sale of their property.

This left around 150,000 people with insufficient time to consider if they had a gain, and even less time for the 85,000 people who had to report it.

Between 6 April 2020 and 6 January 2021, one in three UK property tax returns were filed later than the 30-day window according to HMRC.

Industry reaction

Michael Steed, co-chair of the Association of Taxation Technicians' technical steering group, said:

"The very short time limit for reporting disposals of residential property has proved really challenging for those affected.

"A large part of the problem is that many taxpayers are simply not aware of the new requirements and with such a short deadline, it was very easy to miss.

"The OTS also called for more work to be done to make people aware of these reporting rules and we would still like to see the Government do more to alert landlords, second home-owners, and others to these obligations."

How to report

First, a capital gains tax on UK property account needs to be set up on HMRC's website. This provides the facility to report the disposal, pay any tax due, and amend any previous returns.

Once set up, the online capital gains tax disposal return needs to be completed within 60 days of completion if any tax on gains from additional residential property disposals arises.

Just be aware that if you do decide to complete your own online capital gains tax disposal return, late-filing penalties apply if you fail to file within the new 60-day timeframe.

It also needs to be reported on the relevant self-assessment tax return as it goes towards your final capital gains tax liability on all asset disposals made in a tax year.

We can report any disposal on your behalf.