In this brief blog, we will answer the question,” how does HMRC know I sold my house”.
People often wonder how HMRC would know if they sold their house. They are aware that the reporting element is left to them and they are aware that a house sale is registered at the land registry so stamp duty can be paid by the home buyer but does this affect the home seller? And will this let HMRC know that you have sold your house?
How does HMRC know I sold my house?
HMRC uses a lot of techniques to determine when people have evaded tax. One of those methods is a computer called Connect which was launched in 2010. This computer consumers a lot of data and can determine where and when tax evasion is taking place.
HMRC can find out if you sold your house from the land registry records, from records of you advertising your property, bank transfers, any changes in rental income(if you rented the property before),capital gains tax returns which you should file and stamp duty land tax returns from the buyer and a host of other ways.
It is your duty as a seller to report the sale of assets on the capital gains section of the self-assessment return if there is capital gain due after deducting your capital gain income and capital gain loss and there is income which surpasses the current capital gains exemption limit( this is currently £12,000) or you must report capital gains when there the proceeds of the sale of the capital assets is more than four times the annual exemption – currently 4 x 12,000 = 48,000. There are some exemptions to this rule which you can see on the self-assessment notes or by asking a qualified tax advisor.
The SDLT1 form, which is the basic stamp duty land tax return, asks for the address of the property and the details of the seller. This means HMRC would know you have sold your home.
HMRC could also know you sold your house by someone reporting you for tax evasion. HMRC runs a highly successful tax evasion hotline and has even paid over £400,000 to confidential informants.
Can the taxman see my bank account?
Plans were previously discussed to give the taxman “HMRC” powers to look into your bank account without your permission. It is not currently clear if the taxman has these powers and in what way they are used. In the past, your bank would have had to tell you that HMRC was going to be looking into your bank statements.
How long do I need to live in a house to avoid capital gains tax?
Generally, you will need to live in a house for 12 months and have it be your permanent residence for those 12 months for you to avoid capital gains tax. There have been cases where people have been able to avoid capital gains tax by living in the property for much less.
In this brief blog, we discussed how HMRC could know if you sold your house. We hope you found it useful.