HMRC’s plan to accelerate capital gains tax on property sales
Find out about changes to capital gains tax on property sales coming into force next year.
Major changes to the regime for capital gains tax on property sales will take effect from April 2020.
They will affect how and when you’re required report and pay capital gains tax.
What’s the full story?
Currently, capital gains tax on property sales made by individuals are reported through self-assessment.
This means, for example, if you sell a property between 6 April 2019 and 5 April 202 you must declare it on you tax return and pay the tax you owe no later than 31 January 2021.
New rules will apply for 2020/21 onwards meaning that the tax payable on certain types of gain will be due up to 21 months sooner.
The new rules apply where capital gains tax on property sales is payable for gains made from the sale of residential property located inside or outside the UK on or after 6 April 2020.
You’ll have just 30 days following completion to submit a provisional calculation of the gain and pay the tax you estimate is due.
You’ll still be required to declare the gain on your self-assessment tax returns and pay, by the usual self-assessment deadline, any CGT due over and above your provisional payment.
The 30 day declaration and payment applies whether or not you’re in the self assessment system.
If you aren’t HMRC says it will not require you to register for self assessment just because you’ve made a capital gain.
Instead, after the tax year in which you made a gain ends you’ll be required to review your provisional calculation and make any changes needed.
To work out you provisional CGT bill you’ll need to estimate your taxable income for the year to determine how much CGT is payable at 18% and how much at 28%.
You’ll be allowed to reduce the gain liable to tax capital losses brought forward from earlier years and those made in the same year as the gain up to when you make your provisional calculation.
If you intend to sell assets which will make a loss, say shares, consider making the transaction before you make a gain reportable under the 30 day rule.
That way you can take account of the loss when working out your provisional payment.
Once you’ve submitted your provisional calculation and paid the tax you won’t be allowed to reduce it, say because you made a capital loss later in the year, until you submit you self assessment return or year end review.
There will also be penalties for failing to meet the 30 day deadline for reporting a gain and paying tax.
Do you have any questions about capital gains tax on property sales from your property portfolio? Get in touch and our team of property experts can help.