What is Capital Gains Tax?
Over the past few years, there have been frequent changes in the taxation laws for property owners. Capital Gains is a tax paid by landlords when they come to sell a property. The amount you pay is calculated on the levy of profit you receive from the sale and your own person invoice. You can normally expect this tax to be payable when you’re selling either a buy-to-let property or a second home.
When do you have to pay Capital Gains Tax?
When you sell a property, you don’t get billed for Capital Gains Tax, instead, you must work out if your total gains are above your tax-free allowance. If they are above the allowance, then you must report and pay the amount.
Capital Gains Tax is payable only once your property is sold on the date of completion. In the 2021 Autumn budget, the government made it compulsory for landlords to report the sale of the property and pay the Capital Gains Tax they owe within 60 days. Even though you have 60 days, it is always recommended that you file Capital Gains Tax as soon as possible to avoid delay charges that could occur.
How do you report the sale of the property?
All reports should be filed to HMRC through their digital online system. To make a report, you must log in via Government Gateway and if you haven’t already, register for a ‘Capital Gains Tax on UK Property’ account.
You can either choose to report the sale of the property yourself or you can allow your tax adviser to complete the report on your behalf. Once the report has been submitted, you can then expect to receive a payment reference from HMRC with payment details.
If you’re a landlord and require some extra help with working out your Capital Gains Tax or any other business and tax enquires, then contact our team today!