Tax charge when you sell residential property investments

Tax charge when you sell residential property investments

Since 1st July 2020, in most instances, you are required to report and pay tax within 30 days when you make a profit on the sale of a residential property that is not your main home.

The change has drastically reduced the previous time gap between the date of sale and the date of paying the tax.  You will now be hit with a late filing penalty from HMRC if you do not report and pay the tax due on these transactions within 30 calendar days.

This type of tax is called Capital Gains Tax (CGT). CGT was payable previously on profits from residential property investments (such as buy-to-let flats, holiday homes, inherited property). It should be noted that it is the timescale that has changed, not the basis of the tax.

Your main home (your Principal Private Residence) is normally exempt from this tax, but care is needed because this is not always the case. You can be liable for CGT on some part of the profit made when you sell your main house if you have used it for a business, or if you have let it out to third parties.

It is also important to note that “investment” properties that you have “Flipped” (purchased to develop and resell) would be classed as a trading transaction which would be taxed via Income Tax.

Both types of property investments (buy-to-let and Flips) are popular in Scotland, especially in Glasgow, Edinburgh, and Aberdeen.

ad+ has extensive experience in all aspects of accounting and tax which affect property investments.

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