30 day deadline for CGT payments on residential property disposals

From 6 April 2020, UK residents disposing of residential property that gives rise to a CGT liability will need to file a standalone return with HMRC and pay the tax due within 30 days of completion of the sale.

These changes will substantially bring forward the date for reporting the gain and paying the tax due, which is currently by 31 January following the end of the tax year. For those taxpayers realising gains close to the start of the tax year, this brings the due date for paying the tax and reporting the gain 22 months earlier than it would otherwise be.

The new return, like the self assessment tax return, will need to be completed and filed online, so taxpayers will need to have either a Government Gateway account, or an accountant authorised to submit the return on their behalf. Those not already registered with an accountant, or who don’t have a Government Gateway account, will therefore need to bear this in mind when they start the property sale process, to ensure the relevant paperwork can be completed on time.

In addition to potential difficulties in meeting their reporting obligations, taxpayers may also find difficulties in computing the capital gains tax payable. The new provisions require taxpayers to make a reasonable estimate of the tax due. The applicable capital gains tax rates for residential property depend on the availability of the basic rate band, which requires knowledge of your income in the year. Therefore, if taxpayers have fluctuating income levels, it can be difficult to estimate the extent of the basic rate band that would be available. Similarly, for those taxpayers with share portfolios, it is unlikely to be clear, especially at the start of the tax year, whether there are any current year capital losses that might be available to offset the gains. As a result, capital gains tax could easily be overpaid.

Although announced in the Autumn Statement 2015, the introduction of the new measures was deferred until April 2020 by the Budget 2017. The bringing forward of the shorter deadline for reporting and tax payments therefore coincides with the restrictions on letting relief and the reduction in the deemed final period of ownership, dealing a further blow to those looking to sell their former main residence who are unable to do so by 5 April 2020.

For further information on property tax changes, please contact Gemma Hedges on 023 8046 1259.