Calculating and Reporting Capital Gains on UK Residential Property

Calculating and Reporting Capital Gains on UK Residential Property

When you sell or dispose of a residential property in the UK that is not your main home (or doesn’t fully qualify for Private Residence Relief), you may have to pay Capital Gains Tax (CGT). HMRC requires both the calculation and reporting of this gain within specific rules, especially for UK residents.

1- Calculating the Capital Gain

Step 1: Work out the gain
Subtract the original purchase price of the property from the sale price (or market value if gifted).
For example:

• • Sale price: £400,000
  • Purchase price: £250,000
  • Gain: £150,000

Step 2: Deduct allowable costs
These can include:

• • Stamp Duty and legal fees from purchase/sale
  • Estate agent’s fees
  • Costs of capital improvements (e.g., new extension)

Say allowable costs total £20,000.
Adjusted gain: £150,000 – £20,000 = £130,000

Step 3: Apply any reliefs

If the property was ever your main residence, you might be entitled to Private Residence Relief and Letting Relief (though this has been restricted in recent years to the period you lived in the home at the Same time as your tenants and is only available on the proportion of your home you lived in).
Suppose £30,000 qualifies for relief – new gain: £100,000.

Step 4: Use your annual exempt amount
For the 2024/25 tax year, individuals have a CGT allowance of £3,000.
Taxable gain: £100,000 – £3,000 = £97,000

Step 5: Apply the tax rate
For residential property, CGT is charged at:

• • 18% for basic rate taxpayers
  • 24% for higher or additional rate taxpayers
    The gain is added on top of your income to determine the rate.

2- Reporting the Gain – HMRC Gateway and 60-Day Rule

• Since 6 April 2020, UK residents must report and pay CGT on UK residential property within 60 days of the completion date (not the exchange date).
• You must do this through the HMRC Capital Gains Tax on UK Property service, which is separate from your Self Assessment tax return.

Steps:

• 1. Create a Capital Gains Tax on UK Property Account via the HMRC online portal.
  2. You’ll need a Government Gateway user ID. If you don’t have one, you can create it during the process.
  3. Report the gain, entering sale and purchase details, reliefs, and allowable costs.
  4. Pay the estimated CGT within the 60-day deadline.

Even if you’re completing a Self Assessment return, you still must report separately within 60 days. However, you do not have to file a Self Assessment to report the gain if you are not required to do so for other reasons.

Penalties apply for missing the deadline:

• • Late filing penalty of £100
  • Daily penalties after 3 months
  • Interest on late payment of tax

Calculating CGT involves subtracting the purchase price and allowable costs from the sale proceeds, applying any reliefs, and deducting the annual exemption. You then pay tax at 18% or 28% depending on your income. UK residents must report disposals of residential property through HMRC’s online service and pay the tax within 60 days of completion.