Selling a Second Home, Buy-to-Let or Inherited Property? Don’t Miss the 60-Day Capital Gains Tax Deadline

If you are selling a second home, a buy-to-let property, inherited property, or certain other residential assets, there may be an important tax deadline you need to be aware of.

Many property owners are surprised to learn that, in some circumstances, Capital Gains Tax (CGT) must be reported and paid to HMRC within 60 days of completion. Missing this deadline can result in interest charges and penalties.

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit (or “gain”) made when you sell, give away, or otherwise dispose of an asset that has increased in value.

For residential property, CGT is most commonly relevant where the property being sold is not your main home. This can include:

• Buy-to-let properties

• Second homes or holiday homes

• Inherited properties

• Land and development plots

• Properties that have not qualified fully for Principal Private Residence Relief

Does Everyone Need to Pay Capital Gains Tax?

No. Most people selling their main residence will not have a CGT liability because of Principal Private Residence Relief (PPR Relief).

However, if the property has not been your only or main residence throughout your ownership, or if it has been rented out, there may be tax to pay.

The rules can become particularly complex if:

• You own more than one property

• You have moved between properties

• The property was inherited

• The property is held in trust

• The property has extensive gardens or grounds

• You are separated or divorced

• You are a non-UK resident

The 60-Day Reporting Requirement

Since April 2020, many UK residential property disposals that give rise to Capital Gains Tax must be reported to HMRC within 60 days of completion.

An estimate of the tax due may also need to be paid within that same period.

In some cases, a return may be required even where no tax is ultimately payable or where a loss has been made. The exact position depends on the circumstances of the transaction and the seller.

Principal Private Residence Relief

Principal Private Residence Relief can significantly reduce or eliminate a CGT liability when selling a property that has been your main home.

The relief is available in many cases where a property has been occupied as your only or main residence during your ownership period.

There are also special provisions, including:

• Relief for the final period of ownership, even if you no longer live in the property.

• Extended relief in certain circumstances involving disability or long-term care home residence.

• Special nomination rules for people who own more than one property.

Because these rules can have a significant impact on your tax position, professional advice is often worthwhile before making decisions about moving into, letting, or selling a property.

Why Early Tax Advice Matters

Many sellers only seek tax advice after agreeing a sale. Unfortunately, by then some planning opportunities may already have been lost.

Obtaining advice before marketing a property can help you:

• Understand any potential CGT liability

• Ensure reporting deadlines are met

• Consider available reliefs and exemptions

• Avoid unexpected tax bills

• Reduce the risk of penalties and interest

How JB Property Law Can Help

As conveyancers, our role is to deal with the legal aspects of your property transaction. We are not tax advisers and cannot provide Capital Gains Tax advice or prepare CGT returns.

If your sale involves a buy-to-let property, second home, inherited property, or any other circumstances where CGT may arise, we strongly recommend obtaining advice from a suitably qualified accountant or tax specialist as early as possible.

If you are unsure whether Capital Gains Tax could affect your sale, please contact our team. We can help identify situations where specialist tax advice may be needed before your transaction progresses.