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    Tag: capital gains tax

    APR and BPR thresholds rise to £2.5m – what it means for family businesses

    Posted on by Rebecca Campbell

    The threshold for 100% relief under Business Property Relief (BPR) and Agricultural Property Relief (APR), which the government had previously announced would be £1 million per estate, is to now be set at £2.5 million per estate, effective from 6 April 2026. This change was quietly announced by HMRC through a press release on their website on 23 December 2025. This represents another awkward U-turn for the government in terms of its strategy around tax policy, but one which will be welcomed by business owners and farmers alike.

    For family-owned businesses and estates, this change offers greater protection from Inheritance Tax (IHT) than was originally anticipated, following the October 2024 Budget. However, the announcements may frustrate those families who have already set plans in place to deal with their succession planning, in the expectation of a £1m allowance being introduced.

    What the change means in practice

    From 6 April 2026, the first £2.5 million of BPR and APR qualifying assets should receive full IHT relief, with any value above that eligible for 50% relief. Spouses and civil partners can combine their allowances, meaning a couple could pass up to £5 million of qualifying assets free of IHT, on top of the usual nil-rate bands.

    There are also set to be provisions where the death of one party to a marriage occurred before 6 April 2026. In those circumstances, it is envisaged that the survivor’s estate will be able to benefit from a “transferable” allowance of £2.5m – effectively meaning that widowers are no worse off in terms of the allowance they would be entitled to compared to a married couple where both parties are still alive.

    The £2.5m allowance also applies to assets held in trusts for the purposes of calculating the 10 year anniversary charges. For business/agricultural assets held in trusts, the value of which is over £2.5 million, 50% relief will apply and IHT will be due on the excess at rates of up to 6%.

    Who benefits most

    This increase is particularly relevant for family-owned businesses where:

    • Business assets make up a significant proportion of the estate
    • Multiple generations are involved in ownership or management
    • The estate has grown over time and is likely to exceed the previous £1 million cap

    Why planning is still crucial

    Even with the higher allowance, estates above £2.5 million may still face some exposure. Now is an ideal time to:

    • Review business and family asset structures
    • Consider whether lifetime gifting or intergenerational transfers are still appropriate given the increase in headroom – is it better to hold on to assets and benefit from a tax free CGT uplift on death, for example?
    • Factor future business growth and succession plans into estate planning

    Planning ahead ensures family businesses can pass on wealth efficiently while maintaining control and continuity.

    Key takeaway

    The higher APR and BPR thresholds present a welcome change to what the government were originally proposing.

    Whilst many estates may will now be fully covered by IHT reliefs (in the context of business/agricultural assets), careful planning remains important for higher-value businesses, businesses which are likely to increase in value, or complex family arrangements to make the most of the relief and protect family wealth.

    For guidance on how these changes affect your family business or estate, contact Roger Phillips to review your succession and estate planning ahead of April 2026.

    Self Assessment – 100 days to go until tax deadline

    Posted on by Georgia Flatley

    With 100 days to go until the deadline for online returns (31 January 2026) there’s no time like the present to complete your tax return.

    Sending your return early comes with the benefit of knowing what you owe so you can budget to make the payment by 31‌ January 2026, and if you need to look at the range of payment options available, filing early allows you to enter a payment plan in good time. Any repayments which may be due can also be claimed early.

    UNSURE IF YOU NEED TO FILE A SELF ASSESSMENT TAX RETURN?

    You must file a self-assessment return if, in the last tax year, you were:

    • self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)
    • a partner in a business partnership
    • you had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value
    • you had to pay the High Income Child Benefit Charge and do not pay it through PAYE

    You may also need to send a tax return if you have any untaxed income, such as:

    • money from renting out a property
    • tips and commission
    • income from savings, investments, and dividends
    • foreign income

    If you are still unsure if you need to file a return, you can use the HM Revenue and Customs check service by clicking here.

    GET IN TOUCH

    For further advice or help with completing your 2024/25 self-assessment tax return, please get in touch with a member of the tax team by emailing enquiries@pmm.co.uk.

    The key to successfully running a family business

    Posted on by Rebecca Campbell

    Running a family business can have many advantages if managed correctly and in harmony, but it can also bring many challenges which could lead to potential conflicts, affecting business performance and growth.

    One key point to consider when running a family business, is creating a clear separation between any family and business matters to avoid any issues that could affect the day to day running of the business and hinder long term business growth.

    In our recent blog, our accounting + advisory team layout some key ways to successfully create harmony when running a family business:

    Set a clear long-term vision

    Setting a clear long-term vision from the outset is essential for the success of any family business. This will help ensure your business goals are aligned, you follow a consistent strategy and therefore decisions can be made quickly and efficiently, avoiding any unnecessary conflict. By establishing a common vision, it means each family member can focus their efforts on what truly matters – ensuring the business runs smoothly and remains resilient through challenges.

    Make use of outsider expertise

    It is important to reach out for help in areas where the family don’t have expertise. Typically, this includes law and finance but often can include marketing, advertising and sales. Engaging with experts allows for different opinions and a fresh perspective that can help shape your vision and goals. It also allows for unbiased decision making that can form neutral opinions outside of your family views.

    Outline clear roles and responsibilities

    Setting clear roles and responsibilities from the outset ensures everyone understands their accountability. This helps team members focus on their own work, reduces overlap, and minimises the risk of any conflict or disputes between family members.

    Ensure that business and family matters are kept completely separate

    Although this can be difficult, especially when you spend time together both at work and outside of it, keeping any family matters separate from business matters will minimise disruption to business activities. It is important to differentiate between both family life and work in order to keep those healthy relationships.

    Succession planning

    Succession planning is a key challenge for businesses of all sizes. This process should be collaborative and transparent to build trust and continuity. It’s important for all family members within an organisation to understand each individual’s timeline for working in the business and therefore to plan who will take over their roles and responsibilities when the time comes.

    What areas of tax should you consider when handing over a family business?

    When it comes to retirement for a family business, thought should be given to ensuring any benefit from appropriate tax reliefs is obtained which could help save you a lot of money. There are various ways you can look to do this and it’s vital to understand all the options in detail before making any decisions, however some of the common considerations include:

    Capital Gains Tax (CGT)– This should be considered when passing down a business to a family member. Subject to certain conditions, CGT will not be due on a qualifying transfer made as a gift. However if these conditions are not met, CGT may be due on the value as if it were a sale at market value. There are also CGT reliefs which could be used if CGT is payable.

    Income tax – It’s important to understand how you will fund a retirement and what levels of income tax you might need to pay. This could depend on whether you retain an interest in the family business and receive dividends or a salary, verses if you were to draw on a pension.

    Inheritance Tax (IHT) – This should be considered if a business is passed onto other family members, as IHT could become due. Rules around the reliefs available for qualifying businesses are changing from 6 April 2026, so now is the time to understand what liability could become due on your estate, and whether any planning can be undertaken to reduce the exposure to IHT.

    Get in touch

    For further information or advice on how we can help you navigate the challenges that come alongside running a family business or help you to plan for the future, please get in touch with a member of the team by emailing enquiries@pmm.co.uk or calling 01254 679131.

    Autumn Budget – are property taxes in the sights of the Chancellor?

    Posted on by Rebecca Campbell

    Property tax is once again under active review by the government, with speculation in the press ranging from a new ‘mansion tax’ to more fundamental changes such as replacing stamp duty or reforming council tax. These discussions highlight both the fiscal pressures facing the Treasury and the ongoing challenge of balancing fairness, revenue generation, and housing market stability.

    Property investment under pressure

    Property investors and landlords have faced a series of tax and regulatory changes in recent years. In April 2025, stamp duty rates were increased for buy-to-let purchases, following earlier reforms to renters’ rights. At the same time, the Royal Institution of Chartered Surveyors (RICS) has reported that the availability of rental housing has declined for 11 consecutive months, a trend that risks putting further upward pressure on rents.

    Unlike trading businesses, property investors do not benefit from the same reliefs for capital gains tax (CGT) or inheritance tax (IHT), and higher debt costs receive limited offset. Taken together, these factors have reduced the attractiveness of property as an investment class.

    Proposals under discussion

    Recent reports suggest that the Treasury is examining the possibility of replacing stamp duty with a proportional property tax on homes sold for more than £500,000. Unlike the current one-off levy, which can distort behaviour around transaction thresholds, a proportional tax would rise in line with property values and affect a narrower segment of the market.

    The government are also said to be considering an overhaul of council tax, which is still based on 1991 property valuations. Proposals include a shift to a modern, valuation-based local property tax collected from owners rather than residents.

    Property-related taxes already account for around 10% of UK tax receipts, nearly double the OECD average, making them a key component of fiscal planning.

    The wider context

    The government’s room for manoeuvre is limited. Commitments from the Chancellor to not raise income tax, VAT, or national insurance have shifted attention towards property as a more politically viable tax base. At the same time, a fiscal gap estimated at £40 billion has increased pressure to identify reliable revenue streams.

    Speak to an adviser

    Property taxation is likely to remain at the centre of fiscal policy debates in the months ahead. While the government is exploring reforms intended to improve fairness and stability, the challenge will be implementing changes without discouraging investment or further reducing housing supply.

    For landlords, investors, and businesses with property interests, the Autumn Budget could bring significant changes. Now is the time to review ownership structures, financing arrangements, and succession planning, so you are prepared to adapt quickly if reforms are announced. Speaking with your adviser early can help identify opportunities and mitigate risks in what remains a fast-moving tax landscape. Get in touch with property tax expert, Jonathan Cunningham, by clicking the link below.

    Fee Protection Insurance: what is it and why do you need it?

    Posted on by Rebecca Campbell

    HMRC is intensifying its compliance efforts, making tax investigations more common. In the Spring Statement 2025, the government allocated £100 million to recruit an additional 500 compliance officers, aiming to raise over £1 billion annually in unpaid taxes by 2029-30. As a result, tax investigations are likely to become even more frequent, reinforcing the importance of fee protection insurance.

    Dealing with a tax enquiry can be expensive, but fee protection insurance can safeguard you from unexpected costs. Tax manager, Julie Walsh, explains everything you need to know…

    What triggers a HMRC investigation?

    Tax investigations occur when HMRC identifies discrepancies, risks, or patterns in your tax filings. However, your tax return can also be selected at random, even if everything appears correct. Common triggers include:

    • Late or incorrect tax returns
    • Unusual account activity
    • Large fluctuations in reported income
    • High-risk industries (e.g., cash-heavy businesses)

    What can HMRC investigate?

    HMRC can check various taxes and financial records, including:

    • Income Tax
    • VAT
    • Corporation Tax
    • Capital Gains Tax
    • Payroll records (PAYE)

    Investigations fall into three categories:

    1.Aspect enquiry – HMRC examines a specific part of your tax return.

    2.Full investigation – A comprehensive review of your tax affairs.

    3.Random check – No specific reason, just routine compliance.

    Why fee protection insurance matters

    Defending an HMRC enquiry can accumulate significant professional fees. Fee protection insurance covers your accountant’s costs, ensuring you receive expert representation without the financial burden. While fee protection insurance does not cover any additional tax found to be owed, it provides crucial financial support by covering the costs of defending your case. This allows you to fully comply with HMRC’s investigation without the stress of excessive accountancy fees.

    What if you don’t have fee protection insurance?

    Without cover, you’ll bear the full cost of professional fees, which can escalate depending on the complexity of the investigation. These expenses can run into thousands of pounds, adding stress to an already challenging process.

    Stay protected

    Investing in fee protection insurance ensures you’re not left facing rising costs. At PM+M, we offer a comprehensive protection plan tailored to your needs. Contact Julie today, by clicking the button below, to learn more about how we can help protect you and your business from unexpected tax enquiry expenses.

    Autumn Budget – preparing for changes to Capital Gains Tax

    Posted on by Rebecca Campbell

    With the Autumn Budget fast approaching, there is widespread speculation that some potentially significant changes to the Capital Gains Tax (CGT) regime may be on the horizon, set to be unveiled in Rachel Reeves’ first Budget as Chancellor on 30 October 2024.

    Roger Phillips, Tax Partner at PM+M, shares his thoughts on what could be announced and offers guidance on how business owners, investors, and shareholders can prepare for the potential changes.

    Capital Gains Tax – what could change?

    For several years now, raising the rate of CGT has been suggested as an effective way to increase tax revenues (you may remember a similar situation in 2021, which didn’t materialise). However, 2024 feels different. The annual CGT exemption has already been reduced from £12,300 in 2022/23 to just £3,000 this year – many therefore believe that significant changes may be on the horizon.

    One area that may be under review is Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which currently offers a flat 10% CGT rate on the disposal of qualifying business assets, with a lifetime limit of £1 million. If this is reduced, or removed, it could have a considerable impact on business owners planning to sell their company or business assets.

    Deal completion – race against time

    Capital appreciation on assets typically accumulates over time, with tax liability triggered upon disposal. Should the government raise CGT rates – rumours suggest a potential increase to 28% may be on the cards, or even higher to align with income tax rates – the tax burden on disposals would significantly increase. Given that nobody knows what will happen (yet) – the lack of information creates panic, as markets prefer certainty. The result of which is a rush to close deals before 30 October. By being silent on the matter, there is no doubt that the government will have raised a significant amount of CGT revenue already, even before Budget day.

    Although a CGT increase could be phased in or apply in the next tax year, many are unwilling to take the risk. In the past, significant tax increases have sometimes been implemented immediately, which only adds to the pressure to complete transactions now. An increase in CGT would affect a broad range of asset holders, including business owners, shareholders, property investors, and landlords.

    How can I prepare – move offshore or sit tight?

    Despite best efforts, not all deals will make it across the finish line in time, whether that’s down to starting too late, unforeseen complications, or buyers leveraging the pressure on sellers.

    If CGT rates increase only marginally, the market will likely absorb the change without major disruption. However, if the increase is substantial, as some are predicting, it could slow the M&A market in the short to medium term.

    Sellers may choose to hold onto their businesses and assets, waiting for a potential new government with a ‘more favourable’ tax policy – although clearly they will be waiting for some time for this – with no guarantees of more favourable treatment. Others may consider moving abroad, severing their UK residence and avoiding UK CGT by staying abroad for more than five years (although this wouldn’t apply if people were looking to escape CGT on property).

    Managing uncertainty – a balanced approach

    Attempting to anticipate changes in the Autumn Budget and making financial decisions based on speculation is inherently risky. That said, it’s easy to understand why many are taking a “better safe than sorry” approach. However, it’s crucial to ensure that decisions are made with sound commercial judgement rather than fear of potential tax increases.

    Flexibility is key

    If you are in a position to remain flexible and adaptable, there’s no reason why the upcoming changes should derail your long-term goals. While it may be tempting to rush into decisions, a balanced, well-informed approach can help you navigate the changes ahead and continue towards the success you have worked so hard to achieve.

    As the Autumn Budget approaches, the next few weeks will be crucial for those seeking to secure favourable tax outcomes ahead of potential CGT hikes. Regardless of the outcome, preparation and professional advice are the best tools to ensure your financial objectives remain on track.

    Get in touch with Roger Phillips to discuss your circumstances in more detail by clicking the button below.

    Autumn Budget 2024 – the future of inheritance tax

    Posted on by Rebecca Campbell

    The future of inheritance tax has been a hot political debate in recent years. Before the general election in July this year, there were discussions of a potential reform or even abolishment under the Conservative government. However, following Labour’s landslide victory, IHT increases could be on the horizon.

    The latest figures for the 2021/22 tax year show that IHT receipts are on the rise – nearing £6billion annually, with 800 additional estates becoming liable for IHT in that period (a 3% increase on the previous year). In real terms, this means that 634,000 estates paid no IHT at all, with only 4% of deaths resulting in IHT being owed in 2021/22. Will the rumoured changes mean more people are caught by the IHT net?

    Wendy Anderson, PM+M partner, explains the current IHT rules, what could change, and most importantly, how you can prepare…

    The current IHT rules

    Exemptions and allowances for estates have largely remained the same over the past two decades with the main Nil Rate Band (NRB) frozen at £325,000 since 2009. The introduction of the Residence Nil Rate Band (RNRB) has provided some relief, raising the exemption to £1million per couple for estates that include a primary residence passed on to their children, however, the additional relief is reduced when an estate’s value exceeds £2million.

    The most significant reliefs continue to be for assets left to a surviving spouse (£15.5 billion in 2021/22) and Business and Agricultural Reliefs (£4.4 billion).

    Charitable donations, whether made during a person’s lifetime and at death, are also exempt from IHT. Individuals who leave 10% of their net estate to charity in their will benefit from a reduced IHT rate of 36%.

    What could change?

    Are major changes on the way? With any new government, there is always potential for fiscal reform, and with a £22billion deficit to be addressed – it is likely that we will see changes to capital taxes, including IHT.

    • Business Relief (BR) and Agricultural Relief (AR) – currently, BR lets shareholders in trading companies and business owners avoid paying IHT on the value of their business assets when they are passed on after death or put into a trust. Similarly, AR reduces the IHT burden for farming businesses, making it easier to pass them down through generations. However, BR also covers some investments, like shares listed on AIM. The government could change the rules to limit the types of assets that get full relief, which could increase IHT payments. Stricter criteria for AR could also be introduced, limiting when it can be claimed. There may also be more scrutiny of business assets which aren’t directly involved in trading.
    • Capital Gains Tax (CGT) probate uplift – when assets qualifying for BR or AR are inherited, they also benefit from a CGT uplift to their market value at the date of death. This means that beneficiaries inherit assets with no IHT due and an increased CGT base cost. If these assets are sold shortly after death, the higher base cost often results in little to no CGT being payable. The Chancellor may consider limiting this CGT uplift for non-business assets, ensuring that it only applies in cases where there is no corresponding IHT relief.
    • Pensions and inheritance – pension assets are typically excluded from an individual’s estate for IHT purposes, meaning the value can pass free of IHT upon death. The Chancellor may consider including pension values in the estate for IHT calculations, which would subject them to a 40% tax at death. Currently, if someone over the age of 75 passes away, their beneficiaries face an income tax charge on pension withdrawals. No such charge applies if the pension holder dies before age 75. If pensions are brought into the IHT net, there is a risk of double taxation—both IHT on death and income tax on pension withdrawals—unless the income tax charge is eliminated as part of the reform.
    • Trusts – currently, assets of up to £325,000 can be transferred into a trust every seven years without incurring IHT. For amounts above this threshold, a lifetime IHT charge of 20% applies. Every 10 years, trusts are subject to a maximum 6% IHT charge on assets exceeding the £325,000 threshold. The Chancellor may choose to increase the IHT burden on trusts by either imposing a 20% charge on transfers without considering the nil-rate band, or by raising the periodic charges above 6%.

    How can I prepare?

    If IHT reforms are announced in the Autumn Budget next month, they could be implemented quickly, potentially affecting your financial plans. The good news is, you still have time to act and take advantage of the current tax reliefs, allowances, and rates before any new rules come into force.

    Whether you hold shares, are thinking of gifting assets, or considering setting up a trust, there are strategic steps you can take to protect your wealth from future tax increases. By being proactive now, you can make the most of the benefits that exist under the current framework.

    Unsure if you need to act? If you answer ‘yes’ to any of the below questions, we recommend getting in touch and speaking to a PM+M tax adviser to discuss your specific circumstances in more detail.

    • Do you hold unquoted trading company shares?
    • Do you hold quoted shares?
    • Have you previously transferred rental properties into a trust?
    • Are you thinking about setting up trusts and transferring assets?
    • Are you planning to gift assets to your family?
    • Have you used your inheritance tax annual exemptions?
    • Do you own land used for agricultural purposes?

    This list isn’t exhaustive – if you are concerned about how the upcoming Budget announcements could affect you – we would be happy to arrange a chat to discuss your situation in more detail. Contact Wendy Anderson by clicking the button below.

    Stay tuned to the PM+M website and social media channels to keep up to date with the latest Budget news, as and when it happens.

    Self assessment – are you prepared?

    Posted on by Rebecca Campbell

    With the deadline to submit a paper tax return fast approaching (31 October 2024), and online returns due by 31 January 2025 – there’s no time like the present to complete your tax return, whichever method you choose.

    Sending your return early comes with the benefit of knowing what you owe so you can budget to make the payment by 31‌ January 2025, and if you need to look at the range of payment options available, filing early allows you to enter a payment plan in good time. Any repayments which may be due can also be claimed early.

    Unsure if you need to file a self assessment tax return?

    You must file a self assessment return if, in the last tax year, you were:

    • self-employed as a ‘sole trader’ and earned more than £1,000 (before taking off anything you can claim tax relief on)
    • a partner in a business partnership
    • you had a total taxable income of more than £150,000
    • you had to pay Capital Gains Tax when you sold or ‘disposed of’ something that increased in value
    • you had to pay the High Income Child Benefit Charge

    You may also need to send a tax return if you have any untaxed income, such as:

    • money from renting out a property
    • tips and commission
    • income from savings, investments, and dividends
    • foreign income

    If you are still unsure if you need to file a return, you can use the HM Revenue and customs check service by clicking here.

    Get in touch

    For further advice or help with completing your 2023/24 self assessment tax return, please get in touch with a member of the tax team by emailing enquiries@pmm.co.uk.

    Financial planning considerations for the new tax year

    Posted on by Rebecca Campbell

    With the new tax year underway, it could be a perfect time to review your finances and consider how to make the most of your allowances and investments for the year ahead to gain optimum benefit. Below we consider some of the areas where utilising the allowances available could make a huge difference and potentially save you a substantial amount of money.

    ISA Allowance

    The new tax year means a fresh ISA allowance of £20,000. ISAs can provide tax free benefits for your savings and investments, allowing you to benefit from higher returns over the long term. Maximising your allowance early can allow more time for your investments to grow, free from capital gains and income tax.

    Pension Contributions

    Most pension savers can contribute up to £60,000 per annum into their pension, however, advice should always be taken as an individual’s allowance can be restricted to an amount less than £60,000 due to complexities with the rules. Similar to the ISAs, pensions are tax efficient savings vehicles which can be accessed from the minimum pension age. Your pension can be used to invest in various different investments including cash savings, investment portfolios and commercial property.

    Also, if you haven’t utilised your allowance from the previous three years, it is possible to carry it forward and boost your pension pot further, subject to certain criteria.

    Capital gains tax allowance

    From April 6 2024, the capital gains tax allowance was reduced from £6,000 to £3,000 per person. If find yourself in a position where you have maximised both your pension and your ISA allowance, you could consider investing into a General Investment Account and crystallise your gains on an annual basis using your capital gains tax allowance.

    Dividend allowance

    Rather than investing in growth assets, there is the option to invest into income distributing funds. Any dividend received on unwrapped investments can be claimed tax free if it falls within your Dividend Allowance, the allowance fell from £1,000 to £500 on the 6 April 2024.

    Inheritance Tax

    You are able to give up to £3,000 each year completely free of any inheritance tax (IHT) liability, this can be a useful way to reduce a potential inheritance tax bill, as well as helping out your family with a financial gift.

    The tax-free inheritance threshold is £325,000 per person, above which 40% rate of tax is due (subject to other allowances).

    You can gift more should you wish but if you died within seven years of the gift, the recipient could be subject to a large IHT bill. You are also able to carry over your allowance to the following tax year so if you haven’t used any of your allowance during the previous tax year, you could potentially gift up to £6,000 without any tax liability.

    Get in touch

    For further information or advice on how you can plan ahead to make the most of your finances and maximise the tax allowances available to you, contact a member of our financial planning team today to talk through your personal circumstances by emailing financialplanning@pmm.co.uk or call 01254 679131.

    The information contained within this article is purely for information purposes and does not constitute financial advice.

    HMRC to remind second home sellers to pay CGT

    Posted on by Rebecca Campbell

    HMRC has begun writing to individuals who have recently sold a second home to remind them to file a property disposal return and pay capital gains tax (CGT) within 60 days of completion. HMRC will identify candidate receipts by using unspecified ‘real time information’.

    This follows recent confirmation from HMRC that a CGT property return must be submitted on the sale of a second home, even if a Self Assessment (SA) tax return has already declared the gain. In these situations, the CGT property return must be submitted using a paper return rather than via the online UK property account.

    The only exception is where the SA return is filed within 60 days of completion of the transaction, meaning the SA tax return is filed before the due date for the CGT UK property return. In this case, the CGT UK property return is not required. For example, if a property is disposed of on 25 March 2022, the gain was reported on the 5 April 2022 SA tax return, and it was submitted by 24 May 2022 (60 days from the 25 March 2022), then a CGT property return would not be required. Therefore, this exception is only going to apply in a limited number of cases.

    Taxpayers will be required to contact HMRC to obtain a paper return, which could result in missing the deadline. HMRC recently confirmed that 25,300 CGT UK property returns were submitted after the deadline in 2020/21 tax year, with a further 23,600 in the 2021/22 tax year.

    We will most likely begin to see a decline in the number of returns submitted late following the extension of the deadline from 30 days to 60 days for transactions completing after 27 October 2021. According to recent figures, 2,000 returns were submitted late in the quarter to 31 March 2022, compared to 7,4000 the year before.

    Get in touch

    The latest clarification by HMRC and the requirement to request a paper tax return could lead to further penalty pain for taxpayers. If you would like to discuss the new CGT reporting system in more detail or need help submitting a UK property return, avoiding costly penalties, get in touch with Jonathan Cunningham by clicking the button below.

    20% of taxpayers miss CGT payment deadline

    Posted on by Rebecca Campbell

    According to the latest figures from HMRC, almost 20% of taxpayers failed to report gains from UK residential property and pay the capital gains tax (CGT) on time in 2021/22. The CGT 30-day reporting and payment system, introduced on 6 April 2020 (in the middle of the pandemic), received little publicity from HMRC. After coming into effect, the 30-day deadline was waived for three months and doubled to 60 days with effect from 27 October 2021 due to criticism that the turnaround time was inadequate and awareness of the new rules was limited, but it seems taxpayers who missed the deadline continued to grow.

    How big is the problem?

    The latest CGT statistics, as reported by HMRC, highlight that 137,000 UK property returns were submitted for residential property disposals in 2021/22, with estimates of 26,500 returns filed late (almost 20% of the total). It is estimated that 129,000 taxpayers paid £1.7bn of CGT on residential property in 2021/22, a 50% rise on the previous year, as coronavirus restrictions eased, and property sales increased. However, although the volume of disposals was somewhat suppressed by the pandemic, 28% of UK property returns were filed late in 2020/21.

    Doubling the risk of a penalty

    The new CGT reporting system increases the reporting effort of the taxpayer and their agent, but also increases the risk of a late filing penalty. The UK property reporting service and the self-assessment (SA) system are not connected; therefore, gains will need to be declared twice by taxpayers. Firstly, on the UK property return, and again on their SA tax return. The only instance a UK property return will not have to be submitted is in the rare circumstance that the property deal completes at the end of the tax year, and the SA tax return for that year is filed within 60 days of the completion date.

    Penalty costs

    The penalties for a late UK property return are imposed in the following structure:

    • One day late: £100
    • Over three months late: £10 per day up to 90 days
    • Over six months late: greater of £300 and 5% of tax due
    • Over 12 months late: greater of £300 and 5% of tax due

    Returns submitted over 12 months late will have a penalty liability of at least £1,600.

    Action to be taken

    HMRC is currently contacting taxpayers who failed to file a UK property return for a relevant disposal in 2020/21 and informing them of the requirement to submit a paper version of the UK property return to ensure late filing penalties stop accruing, with a note to explain that the CGT has already been paid via self-assessment (if this is the case). Paper forms (PPDCGT) can be obtained by contacting HMRC directly.

    It is reported that nearly 4,000 appeals have been processed in relation to late payment penalties, a huge increase from 600 in the previous year. It will be interesting to see how HMRC responds.

    Get in touch

    If you would like to discuss the new CGT reporting system in more detail or need help submitting a UK property return, avoiding costly penalties, get in touch with Jonathan Cunningham by clicking the button below.