Date posted: 12th Aug 2024
Most people will be aware that there may be tax considerations when selling a residential property.
It is normally for a landlord selling a property to be aware that they need to pay tax on any profit that arises when the property is sold. It is less well known that if property is gifted or sold at undervalue to a connected person (usually a relative) that tax will still be due, based on a sale at market value.
Even the sale of a person’s residence, could produce tax issues if (non-exhaustive):
- You had access to a second property (even if not owned) and did not make an election to state which was your main home.
- Your main home has land exceeding half a hectare (just over an acre) attached to the property.
- You do not occupy the full property – for instance if there is a “granny annex” or part is used for business purposes.
- You have moved out of the home due to a separation or divorce.
- You lived away or overseas for a period.
- You have sold the property (or part of) for development purposes or obtained planning permission.
If there is tax to pay on the sale of a residential property, whether that is a main home or buy to let, then any tax needs to be reported and paid within 60 days of sale. If you are non-resident, you will need to report the disposal of the property, even if there is no tax to pay.
There may be costs and reliefs that can help reduce your overall tax position, but with a 60-day reporting window, time is key to get your tax affairs in order.
If you do not report the tax to HMRC, they could find out via HM Land Registry records. This would mean that the payment to HMRC would be a lot higher as there would be interest added to any late payments of tax and where you have not acted “reasonably”, HMRC will likely charge a tax geared penalty.
If you have any queries regarding capital gains tax on the sale of a property, contact our expert team.
