30 Day Payment Window for Capital Gains Tax on Residential Property Gains

The government has decided they would like tax to be paid much sooner in respect of capital gains that arise when a residential property, such as a second home or rental property, is sold. Therefore, a new 30-day payment and reporting deadline has been confirmed by the government. This poses a significant challenge for Solicitors engaged in conveyancing, and Licensed Conveyancers, for which you will need to be prepared.

Capital Gains Tax (CGT) is normally payable by 31 January following the end of the year of assessment in which the gain arose. For example, if the gain arises on 1 June 2019, the CGT is due on or before 31 January 2021.

HM Revenue & Customs has confirmed that, for disposals made on or after 6 April 2020, UK residents will have to make a payment on account of the CGT due and submit a return within 30 days following the completion of a residential property disposal. For example, if the gain arises on 1 July 2020, the CGT will now be due on or before 30 July 2020.

These new payment and reporting deadlines apply to individuals, trustees and personal representatives of deceased persons who sell or otherwise dispose of residential property.

Taking any losses and annual exemptions into account, they will have to self-assess the calculation of the amount payable. The rate of CGT payable will be determined after making a reasonable estimate of the amount of taxable income for the year.

For disposals by UK residents, the new reporting and payment requirements will not apply where the gain on the disposal (or the total gain if more than one property is sold) is not chargeable to CGT. For example, if the gain is covered by principal private residence relief, unused losses or the annual exempt amount (currently, £12,000 for individuals and £ 6,000 for trusts) you will not be required to report it as it will not be liable to CGT.

For non-UK residents the return and payment is already due within 30 days of the disposal being completed. This will now be extended to apply to direct and indirect disposals of all UK land made on or after 6 April 2019 (whether or not a gain arises).

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