A nice little earner

Did you know that 20% of people who sell a second property are unaware that they need to pay the Capital Gains Tax (CGT) within 60 days?

It doesn't apply to your main residence, but does include second homes, holiday homes, buy-to-let properties, flips, and 'doer-uppers'.

According to the latest CGT statistics 26,500 people didn't report their property sale in time. Given that the penalties for late filing are:

  • One day late: £100
  • Over three months late: £10 per day up to 90 days 
  • Over six months late: greater of £300 and 5% of tax due
  • Over 12 months late: greater of £300 and 5% of tax due.

Those 26,500 people clocked up some significant penalties.

The government website reported that in the quarter ending June 2022 the average price of a house in the UK was £286K. If you were unaware that you had to file within 60 days and ended up six months overdue, that's not an insignificant sum depending on the capital growth of your property during your ownership.

It's a well-kept secret

It's not surprising the late payers are so many – HMRC haven't told us much. The deadline hasn't been publicised and there isn't a lot about it on the website. There was a brief guide (that came out three months after this was imposed) and a few FAQs – but little else.

Tax advisers have to work quite hard to find out the exact requirements, so tax payers can be forgiven for being in the dark.

However, that doesn't mean they can get away with late payment and submission without penalty.

Don't do this!

Most people provide their accountants with the information to do an annual tax return either in December or January, but house sales don't neatly all happen in November/December.

If you sell your house in January or February and wait until your next tax return is due to tell your accountant – you're already well into high penalties.

So don't include property sales as part of your annual return – contact your accountant immediately and file a separate property return so you know what your liability is before you spend the proceeds.

Your solicitor is unlikely to do more than ask you if you're liable for CGT on the property or not. They're not tax specialists and many are equally unaware of the 60 day deadline.

If in doubt, err on the side of caution and check earlier, rather than later. If you need advice ask your accountant or call us on 01992 554444.