Do you have a second home or a rental property? Are you considering selling this property in the near future? If so, you may need to pay Capital Gains Tax (CGT) on this sale within 30 days, rather than the usual 21 month window.
As the rules currently stand, any residential property that has not been your main residence throughout the period of ownership is potentially subject to CGT at a rate of either 18% or 28% (depending on your level if taxable income).
CGT on such a disposal will usually be due by 31st January following the end of the tax year in which that particular property was sold. Therefore, if you were to sell a property on say, 30th April 2018, (ie the disposal falls within the tax year ending 5th April 2019), under current rules, the tax would not be due until 31st January 2020.
However, under new proposals set out by the government, UK residents who dispose of residential property on or after 6th April 2020 will be required to deliver a return to HMRC and pay any CGT due within 30 days of completion.
In certain circumstances, the new rules can result in a tax payers payment window reducing from 21 months to just 1 month for disposals after April 2020.
April 2020 may seem a relatively long time away, but when it comes to making such a large disposal it is imperative that you plan ahead and understand your tax obligations well in advance of signing on that dotted line.
These new rules clearly set a precedent for HMRC as they extend their initiative to accelerate payments of tax across other taxations currently under the scope of self assessment.
Cheshire accountants, Afford Bond, can offer expert tax advice and guidance If you would like help with your capital gains tax or HMRC self-assessment. Our Tax Director, Chris Regnauld, can be contacted via email at Chris.Regnauld@affordbond.com. For any other queries, please contact Kate.Quirk@affordbond.com