Buy-to-let properties: 30 days to report and pay capital gains tax

Residential landlords have another tax trap to be aware of in 2020/21 – the requirement to report any gains of selling a buy-to-let property.

Buy-to-let landlords can still profit from the rental income paid by tenants and from equity if the rental property’s value increases over time.

Tax isn’t usually paid on the sale of your main residence, although the rules on the sales of rental properties are different.

If you sell one of your rental properties after 6 April 2020 and the gain is taxable, you have 30 days to report and pay the tax.

Under the new rules, the clock starts ticking from the moment you officially complete the sale of your UK rental property.

How do the rules differ?

Back in 2015, let’s say you own a flat in Reading and have just started dating a new partner. You move into his home in 2017 and rent out your flat.

In January 2019, the pair of you put both properties on the market. You sell your flat for £20,000 more than you paid for it.

The sale of your flat goes through in May 2019 and, under the old rules, you have until 31 January 2021 to report and pay the gain through a tax return.

You can see you had more than 20 months to report and pay the tax to HMRC, although I’d advise you do this sooner rather than later.

If the sale of your flat went through a year later, in May 2020, and you made the same £20,000 gain, you would have 30 days to report and pay any tax due on it.

Despite this example being of an accidental landlord, the same rules apply to anyone who plans to sell UK properties outside of their main residence.

How to report and pay tax

Payments are made through the Government Gateway. You will need your user ID and password to login and create a ‘capital gains tax on UK property account’.

Alternatively, you can authorise us to do this on your behalf. We would recommend this given the reduced timeframe.

If you usually submit a tax return through self-assessment, you need to provide details of any gains you made at the end of the relevant tax year.

Penalties

As 2020/21 got under way in the middle of lockdown, HMRC stopped issuing penalties for transactions completed between 6 April and 30 June 2020. This was on condition that any gain was reported and paid by 31 July 2020.

From 1 July 2020, it was business as usual. Anyone who completes the sale of a property that’s not their main residence has 30 days to report and pay any tax due.

Interest charges will be charged if the tax remains unpaid after 30 days for all transactions from 6 April 2020, although we can ensure it never gets to that point.

If you intend to dispose of a buy-to-let property, call me on 07803 782100 or email me on jon@red76tax.com to find out where you stand. I can take the task off your hands, saving you money in the long run.