Capital gains tax on residential property gains

higher rate of capital gains tax on residential property gains.

For capital gains tax purposes, residential property gains have their own, harsher, rules. Not only is taxed charged at a higher rate, but taxpayers also have a shorter window in which to report the gain and pay the corresponding tax over to HMRC.

In the 2024 Spring Budget, the Chancellor announced that the higher rate of capital gains tax on residential property gains would be reduced from 28% to 24% from 6 April 2024. However, this is likely to provide little in the way of comfort for landlords of furnished holiday lettings who will lose the benefit of rollover relief and business asset disposal relief (which reduces the capital gains tax rate to 10%) when the regime is abolished from 6 April 2025. Further, anti-forestalling measures will apply where unconditional contracts for sale are entered into on or after 6 March 2024.

Tax rate

Capital gains tax is charged at the rate of 10% where income and gains do not exceed the basic rate band of £37,700 and thereafter at the rate of 20%. For gains on residential property, the rate is 18% where income and gains fall in the basic rate band; once this is reached, from 6 April 2024, the rate is 24% (a rate of 28% having applied prior to that date).

Reporting the gain

Where a chargeable gain is made on the sale of a UK residential property, this must be reported to HMRC within 60 days of the completion date.

While gains arising on the sale of a home are covered by main residence relief to the extent that the property has been the person’s only or main residence (plus the last nine months), a gain may arise where the property in question is let out or is a second home or has not been the only or main residence throughout the period of ownership.

The gain must be reported online through your Capital Gains Tax on UK property account to report the gain to HMRC online. You can access your account or set one up by signing in to your Government Gateway account.

A paper form can be used if you are unable to report online. You should also use a paper form if you have already filed your tax return for the year in which the disposal occurred.

When reporting the gain, you will need to provide the following details:

  • the address and postcode of the property;
  • the date that you acquired it;
  • the date you exchanged contracts for the disposal;
  • the consideration for the sale of property (or, where appropriate) its market value;
  • the completion date of the disposal;
  • the purchase price (or market value at acquisition, where appropriate);
  • the cost of any improvements;
  • the buying and selling costs; and
  • any tax reliefs that apply (for example, main residence relief or lettings relief).

If you are non-UK-resident, you must report all sales of UK property or land even if there is no tax to pay.

Paying the associated tax

Capital gains tax on chargeable residential property gains must be paid within 60 days of the completion date. Where the sale completed in 2023/24, the higher residential rate is 28%, whereas for sales completing in 2024/25, the higher residential rate is 24%. For both years, the rate is 18% where income and gains do not exceed £37,700.

The tax payable is the best estimate of that due on the gain. If you have realised losses previously in the tax year or not used your annual exempt amount, you can take these into account in working out how much you need to pay. Payment should be made using the online service, quoting the payment reference number provided by HMRC.

When you file your tax return for the tax year in which the disposal took place, you will need to calculate your capital gains tax liability for the year as whole, paying any balance due. If you have paid too much already because you realised losses in the tax year after the property sale, you will be due a refund.

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