Capital gains tax - Payment methods and deadlines

Learning Outcomes

This article outlines the procedures for reporting and paying Capital Gains Tax (CGT) in the UK, focusing on exam-relevant rules and time limits. It details the standard Self Assessment deadlines and the specific reporting and payment requirements for disposals of UK residential property under the 60-day regime. It explains how the accelerated property reporting system fits alongside annual Self Assessment, what “estimated” property CGT means in practice, and how to calculate, report and reconcile those provisional amounts. It covers the main methods for making CGT payments to HMRC, the correct use of payment references, and how misallocation, late payment or late filing can generate interest and penalties. It also highlights the interaction between CGT and Income Tax payment cycles, common pitfalls in exam scenarios (such as confusing exchange with completion), and the practical steps needed to apply these rules accurately in SQE1 problem questions. Particular attention is given to UK-resident and non-UK resident property disposals.

SQE1 Syllabus

For SQE1, you are required to understand the practical aspects of calculating and settling Capital Gains Tax liabilities. This includes knowing the relevant deadlines and methods for payment, and your understanding should enable you to advise clients appropriately in assessment scenarios, with a focus on the following syllabus points:

• the standard deadline for reporting and paying CGT through Self Assessment
• the specific 60-day reporting and payment window for disposals of UK residential property
• the various methods available for making CGT payments to HMRC
• the interaction between CGT payment deadlines and other tax obligations
• how the 60-day property regime is reported (online service) and reconciled in the annual Self Assessment return
• the importance of using the correct payment reference (UTR for Self Assessment; the property CGT reference for the 60‑day service)
• the effect of Principal Private Residence Relief on whether the 60-day obligation arises
• interest and penalties for late reporting or payment
• differences for UK-resident versus non-UK resident sellers and the treatment of trustees and personal representatives.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the standard deadline for paying Capital Gains Tax through the Self Assessment system?
   1. 31 December following the end of the tax year.
   2. 31 January following the end of the tax year.
   3. 6 April following the end of the tax year.
   4. 60 days after the disposal.
2. A UK resident sells a second home (UK residential property) on 1 June, completing the sale on 1 August. When must they report and pay any CGT due?
   1. By 31 January of the following year.
   2. Within 30 days of completion.
   3. Within 60 days of completion.
   4. Within 60 days of the exchange of contracts.

3. True or false? CGT on gains from assets other than UK residential property must always be reported and paid within 60 days of the disposal.

4. Can CGT be paid via cheque?

Introduction

Understanding the correct procedures and timelines for paying Capital Gains Tax (CGT) is essential for tax compliance in England and Wales. Failure to meet these obligations can result in penalties and interest charges. This article details the primary methods and deadlines for reporting and paying CGT, focusing on the standard Self Assessment process and the specific rules applicable to disposals of UK residential property. The rules for UK residents and non-UK residents differ in important respects, and the accelerated “60-day” property regime is in addition to, not instead of, annual Self Assessment where a taxpayer is required to file a return. Getting the reference and route right (Self Assessment versus the property service) is critical to ensure payments are allocated correctly and on time.

Key Term: Self Assessment
The system used in the UK for taxpayers to report their income and capital gains, calculate their tax liability, file a tax return, and make payments to HM Revenue & Customs (HMRC).

Standard Reporting and Payment: Self Assessment

For most disposals resulting in a chargeable gain (excluding certain UK residential property disposals, discussed below), the liability is reported and paid through the Self Assessment tax system.

The key deadline under Self Assessment for CGT is:

• Payment Deadline: 31 January following the end of the tax year in which the gain arose.

For example, if a chargeable gain is realised on 1 July 2023 (which falls into the 2023/24 tax year ending 5 April 2024), the CGT due must be paid by 31 January 2025.

The gain must also be reported on the individual's Self Assessment tax return, which is also due by 31 January following the end of the tax year (if filing online). Paper returns are due earlier (typically by 31 October following the end of the tax year). HMRC will charge interest on late payment and penalties may apply for late filing.

Key Term: Tax Year
The UK tax year runs from 6 April to 5 April the following year.

Key Term: Payment on account
Two instalments (31 January during the tax year and 31 July after the tax year) paid toward next year’s Income Tax based on the previous year’s bill. Payments on account are based on Income Tax; CGT is not included in payments on account and is settled via the 31 January balancing payment.

In practice, Self Assessment often means budgeting for several amounts due on the same date (31 January): the Income Tax balancing payment for the prior tax year, the first payment on account for the new tax year, and any CGT for gains made in the prior tax year. Although they share a date, CGT is distinct from payments on account and is not included in the payment on account calculation.

Worked Example 1.1

Anya sold some shares in March 2023, realising a chargeable gain above her annual exemption. The disposal occurred in the 2022/23 tax year. When must she report and pay the CGT due?

Answer:
The 2022/23 tax year ended on 5 April 2023. Anya must report the gain on her 2022/23 Self Assessment tax return and pay the CGT liability by 31 January 2024.

Special Rules for UK Residential Property

Different rules apply to the reporting and payment of CGT arising from the disposal of UK residential property by UK residents. These rules were introduced to accelerate the payment of tax on property gains and operate alongside the annual Self Assessment cycle.

The 60-Day Reporting and Payment Window

Since 27 October 2021, UK residents disposing of UK residential property which results in a CGT liability must report the disposal and pay the estimated tax due within 60 days of the completion date of the sale or disposal.

This applies to:

• Sales of second homes.
• Sales of buy-to-let properties.
• Properties inherited and not used as a main residence.

The main residence exemption (Principal Private Residence Relief - PPR) means that CGT is often not payable on the sale of a person's main home, so the 60-day rule typically does not apply in those circumstances. However, if PPR does not fully cover the gain (e.g., due to periods of letting, non-qualifying use, or because only part of the property is eligible), the 60-day rule will apply to the taxable portion.

Key Term: Completion Date
The date when legal ownership of the property transfers to the buyer, which is usually the date the purchase money is paid over and keys are handed over. This is distinct from the exchange date when contracts become binding.

Key Term: Principal Private Residence Relief
Relief that exempts gains on the disposal of a person’s only or main residence, subject to qualifying conditions (including periods of occupation). Where relief is partial, any chargeable element may still trigger the 60-day reporting/payment requirement.

The 60-day obligation is based on completion, not exchange. If completion falls after the 27 October 2021 change, the 60-day period applies. A separate 60-day return and payment is required for each completion that triggers a property CGT liability, even if multiple property disposals occur in the same tax year.

Worked Example 1.2

Ben owns a buy-to-let flat. He exchanges contracts to sell it on 10 May 2024 and completion takes place on 15 July 2024. The sale results in a significant chargeable gain. When must Ben report and pay the CGT?

Answer:
Ben must report the disposal and pay the estimated CGT liability to HMRC within 60 days of the completion date. Therefore, the deadline is 60 days from 15 July 2024, which falls in mid-September 2024.

Worked Example 1.3

Clara sells her former home. She lived in it for five years, then let it for three years before selling. Completion is 2 March 2025. PPR covers the five years of occupation but not the three years of letting (subject to any final period rules and lettings relief where applicable). The sale produces a gain partly covered by PPR and partly chargeable. What must Clara do?

Answer:
Because part of the gain is chargeable, Clara must file a UK property CGT return and pay the estimated CGT due within 60 days of completion (i.e., by 1 May 2025). She will also include the disposal on her 2024/25 Self Assessment return to reconcile the final position for the year, taking into account any other gains/losses and the annual exemption.

Reporting Mechanism

A specific online service provided by HMRC must be used to report the property disposal and pay the tax within the 60-day window. This is separate from the annual Self Assessment tax return, although the disposal must also be reported on the tax return if the individual normally files one. Returns made via the property service are based on the best available information at that time: estimates of taxable income for the tax year (to determine CGT rates), available reliefs, losses, and the annual exemption. Variations between the estimated property payment and the final annual Self Assessment calculation are settled as a refund or additional payment on the Self Assessment cycle.

Key Term: Capital Gains Tax on UK property account
The HMRC online service and account used to file the 60-day UK property CGT return and make payment. It generates a specific property CGT reference to use when paying; this is different from a Self Assessment UTR.

Amendments to a submitted 60-day return can generally be made via the online service within HMRC’s permitted time limits (typically within 12 months of the filing deadline). Final reconciliation happens in Self Assessment, which incorporates all gains and losses in the tax year.

Worked Example 1.4

Dylan completes a sale of a UK rental property on 10 June 2024 and files/pay his 60-day return. Later in the tax year he realises a large capital loss on shares. How are his CGT amounts ultimately settled?

Answer:
Dylan had to pay the estimated property CGT within 60 days of completion in June 2024. His subsequent share loss will be factored into his 2024/25 Self Assessment return. The final annual calculation may produce a refund of some property CGT paid or a lower balancing CGT payment by 31 January 2026, depending on his overall gains/losses and the annual exemption.

Exam Warning

Be careful to distinguish the deadlines. The 60-day rule applies only to UK residential property disposals by UK residents that trigger CGT. For other assets (shares, business assets, non-residential property, etc.), the standard Self Assessment deadline of 31 January following the tax year end applies. Non-UK residents face different reporting rules for UK property disposals.

Non-UK resident sellers must report UK property disposals within 60 days even if no CGT is due, and the requirement applies to disposals of UK residential and (since April 2019) many other UK land interests. UK-resident trustees and personal representatives may also be within the 60-day regime where a chargeable residential property gain arises.

Payment Methods

HMRC accepts CGT payments through various methods. The available options depend on the reporting mechanism (Self Assessment or the 60-day property disposal service) and the taxpayer's circumstances. Common methods include:

• Online or Telephone Banking: Using Faster Payments, CHAPS, or Bacs. Requires the taxpayer's Unique Taxpayer Reference (UTR) for Self Assessment or a specific payment reference number for the 60-day property service. Payment times vary: Faster Payments often same day; CHAPS same day if before bank cut-off; Bacs usually three working days.
• Debit Card or Corporate Credit Card Online: Through HMRC's website or the HMRC app. Personal credit cards are not accepted.
• Direct Debit: Can be set up in advance via an HMRC online account for Self Assessment payments. Not typically available for the 60-day property payment.
• At your Bank or Building Society: Possible only if you have a specific payslip from HMRC (and a UK bank that still offers this facility).
• By Cheque through the Post: This is generally the slowest method and requires a specific payslip. HMRC discourages payment by cheque due to longer processing times.

When paying Self Assessment CGT use your UTR and the correct Self Assessment payment route. When paying 60-day property CGT use the property CGT reference from the online service. Using the wrong reference or route may delay allocation and cause interest and penalties if HMRC treats the amount as unpaid.

Key Term: Faster Payments
A UK banking payment system that typically credits HMRC the same day or next day, depending on bank cut-off times and weekends. It is usually the quickest electronic method to ensure funds arrive by a deadline.

Revision Tip

Faster Payments is usually the quickest electronic method, often clearing the same or next day. Ensure clients understand the processing times for different methods to avoid late payment penalties, especially when close to a deadline. Always use the correct payment reference.

Common pitfalls include paying to the wrong HMRC account, using an incorrect reference (for example using a UTR when a property CGT reference is required), posting cheques too close to a deadline, and assuming a bank’s internal cut-off does not matter. Interest runs from the statutory due date until HMRC receives cleared funds.

Interaction with Income Tax Payments

For taxpayers within Self Assessment, the CGT payment deadline (31 January) coincides with the deadline for the final balancing payment for Income Tax and the first payment on account for the following tax year. Taxpayers need to ensure they budget for their total liability across both taxes. Payments made to HMRC are generally allocated against the oldest liability first unless the taxpayer specifies otherwise.

CGT does not form part of the payments on account for Income Tax; it is settled via the 31 January balancing payment. Where a property disposal has already triggered a 60-day property CGT payment earlier in the year, the Self Assessment return will show the final CGT for the tax year, credit any 60-day amounts already paid and settle any remaining balance (or generate a refund).

To avoid allocation errors:

• pay Self Assessment CGT with the UTR via the SA payment route; and
• pay 60-day property CGT with the property CGT reference via the property route.

If a taxpayer is not otherwise within Self Assessment, they may still need to register for Self Assessment if they have other taxable events, or rely solely on the property CGT service for the accelerated property payment and HMRC’s instructions on any requirement to file a full tax return.

Key Point Checklist

This article has covered the following key knowledge points:

• The standard deadline for paying CGT via Self Assessment is 31 January following the end of the tax year in which the gain arose (with paper filing due earlier).
• Disposals of UK residential property by UK residents resulting in CGT must be reported and the tax paid within 60 days of the completion date.
• The 60-day rule uses a specific online HMRC reporting service, separate from the main Self Assessment return, and uses a different payment reference.
• Principal Private Residence Relief often means the 60-day rule does not apply to the sale of a main home; partial relief can still trigger the 60-day obligation.
• Non-UK residents must report UK property disposals within 60 days even where no CGT is ultimately due; trustees and personal representatives may also be within scope.
• Payment methods include electronic bank transfers (Faster Payments/CHAPS/Bacs), debit/corporate credit cards, bank counter payments with payslip, and (less commonly) cheque.
• Using the correct reference (UTR for SA; property CGT reference for 60-day) is essential to avoid misallocation and interest.
• The CGT payment deadline under Self Assessment aligns with the Income Tax balancing payment deadline; CGT is not included in payments on account.
• Interest may be charged on late payment and penalties may apply for late filing of returns (both Self Assessment and the 60-day property return).

Key Terms and Concepts

• Self Assessment
• Tax Year
• Completion Date
• Principal Private Residence Relief
• Capital Gains Tax on UK property account
• Payment on account
• Faster Payments