When you sell a property, you may be subjected to paying Capital Gains Tax (CGT) if you make a profit from selling the property. In this article, we will guide you through how to file a CGT return when you sell a property so that you can meet your tax obligations without any penalty.
What is Capital Gains Tax (CGT)?
Capital Gains Tax (CGT) is a tax levied on the profit you make through the sale or disposal of property, such as land. If you sell an item of property for a higher price than you originally purchased it, the difference would be considered a capital gain and would require you to pay tax on. The amount of CGT varies with several determinants, from your income level and how long you have had the property.
It is important to know about CGT for individuals selling property, including a second home, buy-to-let property, or inherited property. Main homes are normally free from CGT due to Private Residence Relief, but landlords and investors need to know about their CGT liability when selling non-main properties.
Who Has to Pay CGT?
CGT tends to land on those selling a property that is not their primary residence. Landlords, investors, and people selling inherited houses are in this group. If you have sold a second home, a buy-to-let property, or any other non-qualifying property for Private Residence Relief, you might be charged CGT on the gain.
The good news is that there are a number of reliefs and exemptions that might be applicable, such as the annual exempt amount, whereby you can earn a certain amount of gain every year without paying tax.
How to File a CGT Return: Step-by-Step
File CGT return with UK Property Account: If you’re selling a property, you’ll need to register for a Capital Gains Tax account with HMRC. This can be done online through the HMRC website.
Gather Required Information: You’ll need to gather key information about the sale, such as the property’s purchase price, sale price, and any allowable costs (such as legal fees or improvements).
Complete the CGT Return: Fill out the CGT return online, including all relevant details and calculations. HMRC provides an online tool to assist with this.
Pay the Tax Due: Once the return is filed, you’ll be notified of the CGT owed. Make the payment by the deadline to avoid interest and penalties.
Confirmation: After payment, you’ll receive a confirmation that your CGT return has been filed and paid.
Conclusion
Completing a CGT return is an integral part of selling property in the UK. If you complete these steps and give the information that they ask for, you can complete your tax obligation while minimising the possibility of penalties.
