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New Capital Gains Tax deadline on residential property sales

From 6 April 2020, Capital Gains Tax due on the sale of residential properties will be payable within 30 days of completion. At the moment, individuals selling a second residential property that’s not their main residence report a gain on their tax return and pay capital gains tax (CGT) by the January following the end of the tax year in which the sale occurs. So, for a property sold on 6 April 2019, tax wouldn’t be payable until 31 January 2021 – 22 months before CGT is due for payment.

The new ruling gives the taxpayer just 30 days to pay. Great for government cashflow but a real headache for the taxpayer. The CGT payment sits alongside a new online property disposal return. Crucially, the taxpayer is responsible for doing the return, not a solicitor or conveyancer.

What’s needed is a CGT computation, calculating any tax due. Some may struggle without expertise and sound advice as it isn’t necessarily a simple calculation between purchase and sale price. Other things need to be taken into account and reliefs used. Tax is paid on the gain at either 18% or 28% depending on whether an individual pays basic or higher rate tax. At the time of the gain, the full income for that tax year may as yet be unknown so there will also be guesswork about the rate which applies.

A self-assessment tax return including any property gains is, of course, completed after the end of any tax year. Once the year’s income, gains and losses are calculated, the true CGT amount can be ascertained and any ‘on account’ payments deducted, which could result in a repayment of capital gains tax. HMRC could open an enquiry into the property disposal return so it’s got to be correct!

Taxpayers should speak to their accountant as soon as a sale has been agreed so they can help calculate CGT that’s due and the property disposal return can be submitted to HMRC within 30 days of completion. We’re ideally placed to support taxpayers with property returns and any local estate agents and solicitors to ensure clients comply with these new regulations, meet the filing deadline and avoid penalties. Drop into our Kettering offices for an appointment or contact CFW Accountants on 01536 713555 for an initial, informal discussion.

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