CGT on Residential Properties

Changes to Capital Gains Tax (CGT) on the disposal of residential properties came into effect from 6 April 2020 onwards.

Under the old rules, if you sold a residential property it was disclosed on the applicable annual tax return and the payment of CGT fell due by 31 January following the end of that tax year.

From 6 April 2020, where CGT is due on a residential property disposal:

• A UK land return has to be filed; and
• The “notional CGT” due must be paid within 30 days of the date of completion.

The new UK land return is in addition to reporting a disposal on the normal Self Assessment tax return; it does not replace it.

This is a major change to the administration of CGT and one which will require you to be very proactive to ensure that the paperwork is filed and payment made within the deadline.

For UK resident individuals and trustees (the changes don’t apply to UK companies), a UK land return will need to be filed with HMRC where a disposal of residential property gives rise to a chargeable gain or an allowable loss.

Where a gain is fully covered by a relief (such as principal private residence relief), there will be no requirement to file a UK land return. Therefore if you are selling your own home which you’ve occupied for the duration of your ownership no taxable gain will have arisen.

A return will also not be required where the gain is covered by the annual exemption (£12,300 in the 2021/22 tax year) or a brought forward capital loss. For example, you dispose of a rental property for £120,000 having paid £110,000 for it resulting in a gain less than the annual exemption of £12,300. Therefore no UK land return or payment of CGT is applicable.