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Tax Corner: 60-day capital gains tax reporting for residential property disposals

What are the tax implications of selling a buy-to-let property?
What are the tax implications of selling a buy-to-let property? What are the tax implications of selling a buy-to-let property?

QUESTION : I own a number of buy to let properties in the Mid Ulster area and I am in the process of selling one of these. I am aware that there will be a considerable capital gain on this property as I bought it in 2010 after the property crash. How do I disclose and pay this tax to HMRC?

ANSWER : If you make a disposal of UK land and property, you may also need to report the disposal of the property to HMRC on a separate return and pay any capital gains tax (CGT) due within 60 days of the date of completion.

For disposals which completed before 27 October 2021, such returns (and the associated CGT payment) were required within 30 days.

Such a return is not generally required if the 60-day deadline falls after having already disclosed the disposal on a Self-Assessment tax return.

In this case the 60-day deadline for paying the tax is also disapplied. 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, then 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.

Similarly, the requirement to file a 60-day return is generally waived if the 60-day deadline occurs after the deadline for the Self-Assessment tax return on which the disposal should be reported (for example, if contracts were exchanged towards the end of the tax year but completion did not occur until the following January).

However, there is an exception to the above two rules if the amount of CGT reported in your Self-Assessment tax return is less than the amount which would have been payable 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.

If you make the disposal as a non-resident, you should report it within 60 days, even if there is no tax to pay. This applies to disposals of all UK land and property by non-residents, not just residential property. If there is any tax to pay, then it is also due within 60 days.

UK residents disposing of UK residential property should also report it within 60 days, unless there is no tax to pay. Any tax due on the gain should also be paid within 60 days.

Please note that you are required to report these disposals within 60 days even if you intend to file a Self-Assessment tax return for that year at some later point.

You should add the taxable gain (that is, after taking account of any available annual exemption and losses) to your estimate of your other total taxable income in the year of disposal:

1. If the total is less than the UK income tax higher rate threshold (£50,270 for 2022/23), then the rate of tax payable will be 18 per cent.

2. If the total exceeds the UK income tax higher rate threshold by less than the amount of the taxable gain, then the amount of the excess is chargeable at 28 per cent and the rest at 18 per cent.

3. Otherwise (if total taxable income is £50,270 or more, for 2022/23), the gain will be chargeable at 28 per cent.

Malachy McLernon (m.mclernon@fpmaab.com) is partner at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies