Understanding capital gains tax on property is essential when you are buying or selling properties. By familiarising yourself with the applicable rates, exemptions, and strategies to minimise tax liability, you can make informed decisions that can potentially save you money.
If you’re planning to sell or dispose of a property in Northern Ireland, you must report the sale to HM Revenue & Customs (HMRC) using a separate return and pay any capital gains tax (CGT) due within 60 days of the date the sale is completed. Failure to meet the deadline can result in penalties and interest charges.
In this article, we will discuss the important details regarding the 60-day capital gains tax on property reporting and payment requirements when it comes to residential property disposals.
Back to Basics: What is Capital Gains Tax?
Capital Gains Tax is a type of tax that you may have to pay when you sell or dispose of an asset that has increased in value. It is applicable to different types of assets, including property.
How Does Capital Gains Tax on Property Work?
When you sell a property that has increased in value since you acquired it, you are likely to make a profit. This profit is known as a capital gain, and it may be subject to capital gains tax.
Changes in Reporting Deadlines
It’s important to note that the 60-day deadline applies to disposals on or after 6 April 2020. For disposals completed before 27 October 2021, returns and the associated CGT payment were required within 30 days.
60-Day Return Not Required When Reporting on Self-Assessment Tax Return
Under normal circumstances, the 60-day return is not required if the deadline falls after you’ve already disclosed the property disposal on your Self-Assessment tax return. In such a case, you won’t need to file a 60-day return or make a CGT payment within 60 days. However, if the CGT amount reported during the Self-Assessment tax return is less than what you’d have paid within 60 days, the exemption won’t apply.
For example, if your completion date for a property disposal is 28 March 2023, then provided you file your Self-Assessment tax return for 2022/23 including the disposal by 27 May 2023, you will not usually need to file a 60-day return or pay the CGT within 60 days. The CGT would then be due via Self-Assessment on 31 January 2024.
60-Day Return Exception for Unsatisfied Tax Liability
In some cases, the 60-day return exemption will not apply even if the existing two rules outlined above are met. This happens when the CGT amount reported in your Self-Assessment tax return is less than the amount due within 60 days.
For example, suppose your completion date for a property disposal is 28 March 2023 and you have capital gain (after deducting your annual exempt amount) of £5,000, but then on 2 April 2023 you make a capital loss of £7,000 on the disposal of some shares. You cannot deduct the capital loss when considering the 60-day report because it occurs after the completion date of the property disposal. When you file your Self-Assessment tax return, you will be able to offset the capital loss from the capital gain. However, assuming no other capital disposals in the 2022/23 tax year, in this situation you would have needed to file a 60-day return by 27 May 2023 and pay CGT on the property disposal by the same date. You would need to wait until filing your Self-Assessment tax return to claim relief for the capital loss.
60-Day Return Required for Non-Resident UK Property Disposals and UK Residential Property Disposals
Non-residents and UK residents disposing of UK residential property have to report the disposal within 60 days. These reporting requirements apply whether or not any tax is payable.
Estimating Taxable Gains
You must add the taxable gain from the reported disposal to your estimated total taxable income for the year of disposal. The total is charged at:
- 18% if it’s less than the UK income tax higher rate threshold of £50,270 for 2022/23.
- 28% if the excess amount exceeds the UK income tax higher rate threshold by less than the taxable gain.
- 28% if it’s £50,270 or more for 2022/23.
Here to Help with Capital Gains Tax On Property
Understanding the reporting and payment requirements for Capital gains tax on property is crucial when selling or disposing of a property in Northern Ireland. By complying with deadlines and availing of exemptions, individuals can save significant sums of money.
Remember to seek advice from a qualified tax professional or accountant to ensure you are following the correct procedures and taking advantage of all available tax benefits. Contact us today.