Capital Gains Tax: the 60 day property rule explained

If you sell a UK residential property at a gain, there’s a deadline that catches a lot of people out: you have just 60 days to report and pay the Capital Gains Tax. Here’s what you need to know, and how to keep the bill down.

What the rule is

When you dispose of UK residential property and there’s a taxable gain, you must report it to HMRC and pay the tax due within 60 days of completion, not bundled into your next Self Assessment return months later. (The window was originally 30 days and was extended to 60.) Reporting is done through HMRC’s online UK Property Account.

Who it affects

Landlords selling buy to lets, people selling second homes or holiday homes, and anyone disposing of residential property that isn’t fully covered by Private Residence Relief. It can also catch inherited property and gifts of property.

What’s taxed, and what isn’t

Your main home is usually exempt thanks to Private Residence Relief (PRR). But the relief can be reduced where a property has been let, used for business, sits on very large grounds, or wasn’t your only or main home for the whole period you owned it. Investment and second properties are squarely in scope.

How the gain is worked out

Broadly, it’s the sale proceeds less what you paid, less qualifying costs. You can deduct buying and selling costs (such as legal fees and stamp duty paid on purchase) and the cost of capital improvements, an extension, for example, though not general repairs and maintenance. Your annual exempt amount is then set against the gain before tax.

The rates

Capital Gains Tax on residential property is charged at higher rates than on most other assets, and the rate you pay depends on how much of your basic rate band is still available once your income is taken into account. That interaction with your income is one reason timing matters.

How to reduce the bill

• Use both spouses’ allowances and bands, transfers between spouses or civil partners are generally tax neutral, so ownership can sometimes be arranged to use two annual exempt amounts.
• Capture every allowable cost, improvements and transaction costs are easy to overlook and directly reduce the gain.
• Mind the timing, which tax year a sale falls in, and your income that year, can change the rate.
• Check your PRR position, periods of actual occupation and certain reliefs can shelter part of the gain.

The common thread: most of the saving comes from planning before you sell, not after completion.

Miss it and…

HMRC charges late filing penalties and interest on tax paid late. With only 60 days from completion, it’s an easy deadline to fall foul of if no one is tracking it, particularly as the sale completes around the same time you’re busy moving or reinvesting.

How we help

We calculate the gain correctly, claim every relief you’re entitled to, and file within the deadline, ideally after a conversation before you sell, which is where the real savings are made.

This article is general information, not personal advice, and tax rules change over time. For guidance on your own circumstances, get in touch.

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