Overage Tax Calculator
Calculate capital gains tax on overage payments from property disposals — contingent consideration received after the original sale.
Overage CGT Analysis
Frequently Asked Questions
An overage (or claw-back) is an additional payment due to the seller if the buyer achieves planning permission or develops the land within an agreed period after sale. It's a form of contingent consideration.
HMRC treats overage as additional proceeds from the original disposal. CGT is calculated on the overage amount received (after any remaining annual allowance), at 18%/24% for residential property.
CGT is due in the tax year the overage payment is received. You must report it within 60 days if it's residential property (or via Self Assessment for other property).
Use your annual CGT allowance (£3,000), and consider whether your spouse can receive part of the payment. If you are in a lower income year, the CGT rate may be lower.
No. The original sale CGT return reflects only the base consideration received. The overage is treated as an additional chargeable event in the year of receipt.
Deferred consideration is a fixed future payment agreed at sale (taxed in full at the sale date). Overage is contingent on future events (taxed when received/ascertainable).
Commercial property overage is subject to CGT at 10%/20% (not the residential 18%/24%). Business Asset Disposal Relief may apply if conditions are met.
Overage clauses vary — some are triggered by planning permission, others by implementing planning or completing development. Read your overage agreement carefully.
Overage agreements typically run for 10-30 years. After the clawback period expires, the seller loses the right to receive additional payments even if development occurs.
CGT losses from other assets can be offset against overage gains. Current year losses are offset first, then carried-forward losses.
If the original land sale was VAT-exempt, overage is usually also VAT-exempt. If the seller opted to tax the original supply, the overage payment may be subject to VAT.
Overage tax treatment can be complex. Seek specialist property tax advice from a surveyor, solicitor, and tax adviser when setting up or receiving overage payments.