Capital Gains Tax Returns: The 60-Day Rule Explained

Time to read: 4 minutes

When you sell or dispose of certain types of property, understanding your tax obligations is crucial. One such requirement in the UK is the 60-day capital gains tax (CGT) return. This blog explains what the 60-day rule entails, who it applies to, and how to comply to avoid penalties.

What Is the 60-Day Capital Gains Tax Rule?

If you sell or dispose of UK residential property and make a gain that results in capital gains tax liability, you must report and pay this tax within 60 days of the completion date. This rule applies to sales, gifts, or transfers of property and is designed to ensure prompt tax compliance.

Who Needs to Submit a 60-Day CGT Return?

You must complete a 60-day CGT return if:

• You sell or gift a UK residential property that isn’t your primary home (e.g., buy-to-let properties or second homes).
• You make a taxable gain above your annual CGT allowance (£3,000 for the 2024/25 tax year).
• The property is located in the UK, whether you’re a resident or a non-resident.

Exemptions from the Rule

You don’t need to file a 60-day CGT return if:

• The property is your main residence and qualifies for Private Residence Relief.
• The sale results in no taxable gain (e.g., if your gain is within the annual allowance).
• The property is outside the UK and you’re a UK resident.

Steps to Comply with the 60-Day Rule

1. Calculate Your Gain: Determine the gain from the sale by deducting allowable costs (e.g., purchase price, legal fees, and improvement costs) from the sale proceeds.
2. Check Your Allowance: Compare the gain against your annual CGT allowance to see if you owe tax.
3. Set Up a Capital Gains Tax on UK Property Account: If you’re liable, create an account through HMRC’s online portal.
4. Submit Your Return: Report the gain, the tax due, and any reliefs or allowances claimed.
5. Pay the Tax: Ensure the tax payment is made within 60 days to avoid interest or penalties.

Key Deadlines and Penalties

Failing to file the return or pay the tax on time can lead to penalties:

• £100 initial penalty: Imposed if your return is late.
• Daily penalties: Charged after 3 months of non-compliance.
• Further penalties: After 6 and 12 months, additional charges of 5% of the unpaid tax may apply.
• Interest on unpaid tax: Accrues from the 61st day until payment is made.

Practical Tips to Avoid Issues

• Prepare Early: Start gathering documentation (e.g., property purchase and sale records) as soon as you decide to sell.
• Engage a Tax Professional: If you’re unsure about calculations or reporting, consult an accountant or tax adviser.
• Use HMRC’s Resources: HMRC’s online services and guidance can help streamline the reporting process.

Final Thoughts

The 60-day CGT return rule is an essential requirement for property transactions. Understanding your obligations and acting promptly can save you from unnecessary penalties and stress. If you’re planning to sell a property or have recently completed a sale, ensure you’re prepared to meet the 60-day deadline.

Need assistance with your capital gains tax return? Contact us at Taxes Done Right Ltd. to ensure accurate and timely compliance.