Changes to Capital Gains Tax – 2nd property and asset sales

The current delay between making a capital gain on property and paying the Capital Gains Tax (CGT) due can be as much as 22 months.

For example, the CGT arising from a gain made by a UK resident individual on 6 April 2019 will be payable by 31 January 2021.

But that is about to change……

In 2018, the government proposed that CGT would be payable on account within 30 days of the completion date for all UK residential properties disposed of by a UK resident.

This change was due to come into effect on 6 April 2019 to coincide with the new rules for non resident property disposals, but it was delayed until 6 April 2020.

The “on account” description of the tax payment is a misnomer as the full amount of CGT will be payable within 30 days, alongside a new online property disposal return. It is believed that this return may look much like the existing real-time CGT report, except it will be possible for HMRC to enquire into the property disposal return independently of the taxpayer’s Self Assessment Tax Return.

If there is no gain to report or the gain is covered by exemptions or losses, the taxpayer won’t have to complete a property disposal return.

If there is a taxable gain to report, the taxpayer must calculate the CGT due taking into account their annual exemption for the year and guess at the correct rate of CGT to apply (18% or 28% based on 2019/20 rates).

After the end of the tax year, the taxpayer will complete their self assessment tax return, including the property gain. Once their full income, gains and losses for the year are calculated, the true amount of CGT will be ascertained and any “on account” payment will be deducted. This could result in a repayment of CGT for the taxpayer.