New 30-day payment window for Capital Gains Tax on residential property

Due to be brought in from April 2020 subject to there being no further delays, is the new procedure for paying capital gains tax (CGT) on the sale of residential properties.

Normally this would be declared on the tax return for the relevant year and any tax payable by the 31 January following the end of the tax year. For example, a property sale in April 2018, would result in the tax not being made payable until 31 January 2020, meaning a full 21 months from the sale of the property until HMRC get their money.

The new scheme means that the capital gains tax would be payable within 30 days of the sale using the new Residential Property return.

In theory this is a good idea, the tax is paid and the remainder of any cash balance is yours. 

However, there are still many questions yet to be answered:

  • Who will prepare these returns, will it fall on the solicitors to be responsible for completing and filing?
  • The CGT rates payable depend on your other income in a tax year. In many cases the tax would only be an estimate and therefore a payment on account.
  • Further submissions and payments may need to be done should your circumstances change during the year.
  • What is HMRC's policy on penalties and interest, if all reasonable care has been taken with estimated figures but there is a difference in the final calculation?

So, what can you do?

Be prepared! Set up a file now for each property and have it to hand. We recommend that the file contains the following:

  • Initial purchase document
  • Solicitors fees on purchase
  • Costs of any major repairs or work done to the property that have not previously been claimed as an expense against rental income

With any sale of a property that isn't your main home, we always recommend you get advice before putting it up for sale. We can then try and make sure it is done in the most tax efficient way. We can help you with a whole range of tax related services, specifically for landlords, investors and developers, which you can find out more about here.

As ever, we are always here to help and advise should you need support so please contact us today should you want to discuss this further.

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