CGT on property sales due within 30 days
Aug 07, 2018
Draft legislation in the latest Finance Bill will introduce significant changes to the payment of Capital Gains Tax (CGT) and to the reporting of residential property sales to HMRC.
CGT is usually payable on the sale or disposal of a second home or rental property. Currently, UK residents pay any CGT due between 10 and 22 months after the sale takes place, as part of the standard self-assessment tax return process.
New payment on account regime for CGT
Following a recent consultation, the government has now confirmed plans to reduce this payment window. From 6 April 2020 onwards, if you owe any tax on gains from selling or disposing of a residential property, you’ll be required to pay this within just 30 days of the completion date. HMRC are also introducing a new ‘payment on account’ regime, which means you’ll have to submit a capital gains tax return within the same 30-day period. This return will be separate and additional to your self-assessment tax return, and the payment on account will count towards your tax liability for the tax year in which the sale is made.
How the new rule may affect you
Here’s some more detail of how this new rule will be applied and what impact it may have on you:
- Payment will be due within 30 days of the completion date of the sale or disposal
- A new ‘payment on account’ capital gains tax return, which confirms the sale and the amount of tax due, will also need to be filed within 30 days
- If you already complete a self assessment tax return, you’ll still need to include the gain from the sale in your annual tax return. The CGT payment will then be credited against your income tax and CGT liability for the current tax year.
- Each property sale or disposal is treated separately. If you suffer a loss later in the tax year, repayments will be generated on any CGT gains which you made earlier in the year.
- If you don’t pay your CGT within 30 days you’ll be charged interest, and if you return your capital gains tax return late you’ll also be charged a penalty, in line with existing late filing penalty rules.
This significant acceleration in the CGT payment date will no doubt cause difficulties for numerous taxpayers, and may well reduce yet further the number of landlords willing to invest in the buy-to-let property market. If you have any concerns about how the new rule may end up affecting you, please give us a call and we’ll happily discuss your options.