Selling a second home or investment property means Reporting Residential Property Gains. Owners must report residential property gains and pay capital gains tax (CGT) within strict deadlines. Failing to comply can result in penalties and interest charges.
Why Sell a Residential Property?
Property owners sell for various reasons. Some want to capitalise on market trends before the residential Stamp Duty Land Tax threshold changes in April 2025. Others plan to exit the market due to tax changes, such as the end of the favourable regime for furnished holiday lets. Some may want to realise a capital gain before CGT rates change. Whatever the reason, reporting and paying CGT on time is essential.
Capital Gains Tax on Residential Property
Selling a property that has been your only or main residence usually means no CGT applies. However, CGT arises when selling a second home, rental property, or investment property unless tax reliefs cover the gain. The current CGT rates for residential property gains are:
- 18% on gains within the basic rate band (£37,700 for 2024/25).
- 24% on gains above the basic rate band.
Reporting a Capital Gain to HMRC
If CGT is due on a UK residential property sale, it must be reported to HMRC within 60 days of the completion date. This applies to all sellers, including co-owners who must report their share of the gain separately.
How to Report the Gain
Use HMRC’s online reporting service to submit the required details and pay the tax. You can access this service on GOV.UK. Sellers unable to use the online system can request a paper form from HMRC.
Information Required for Reporting
When reporting a residential property gain, you need to provide:
- Property address and postcode
- Date of acquisition
- Date of contract exchange on sale
- Date of completion
- Purchase price (or market value if relevant)
- Sale price (or market value if relevant)
- Costs of purchase and sale
- Cost of any improvements
- Details of available tax reliefs or exemptions
Paying Capital Gains Tax
The CGT due must be paid within 60 days of completion. This is a best estimate based on current tax rates and any available reliefs or exemptions. Payment methods include:
- Debit or corporate credit card
- Online bank transfer
- Cheque (using the 14-character CGT payment reference)
Adjustments to Tax Payments
Your final CGT liability may change when completing your Self Assessment tax return. If later capital losses reduce the gain, you may be eligible for a refund.
Avoid Penalties for Late Reporting
Failing to report and pay CGT within the 60-day window results in interest and penalties. To avoid extra costs, ensure timely compliance with HMRC rules.
Plan Your Tax Efficiently
Selling property requires careful tax planning. If you need support with property tax or financial planning, contact I Hate Numbers. Our team helps businesses, landlords, and investors manage their finances effectively.
Plan it. Do it. Profit.