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October 21, 2020
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HMRC "Nudge" Letters on Sale of Property

HMRC plans to send 14,000 "nudge" letters to individuals it believes may have made a taxable residential property disposal in 2018/19 but did not report it on their self-assessment tax return, thereby encouraging taxpayers to come forward and bring their affairs up to date.

On the sale of residential property, capital gains tax may become payable on the gain. The taxable gain is calculated by taking the sale proceeds and deducting the original cost, the associated costs of disposal/acquisition, any costs incurred on enhancing the value of the property, and the annual exempt amount (£11,700 for 2018/19).

If the taxpayer had lived in the property as their main residence throughout their period of ownership, then Principal Private Residence Relief would usually be available in full to reduce the gain to £nil. Therefore, taxable gains typically arise on the sale of rental properties and second homes.

This is not the first time that HMRC has issued "nudge" letters to those it believes are required to correct non-compliance; over the last couple of years, taxpayers have come to us with letters from HMRC asking them to review their income from rental properties, their offshore assets, income or gains, and the  sale of a second home and/or rental property.

If you have received a letter from HMRC asking you to review your tax position and require assistance with preparing a response and/or bringing your affairs into order, please contact a member of our team.

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Letter from HMRC - Reporting Rental Income

HMRC Letter to Taxpayers with Offshore Assets

HMRC Investigates Sales of Second Homes

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