From April 2020, payment conditions of capital gains tax are taking another acceleration. Individuals, trustees and personal representatives disposing of residential property will need to make a payment on account of any capital gains tax (CGT) within 30 days.
In 2015, non-resident landlords were the first to be hit with this acceleration of tax payment period. The transaction had to be reported within 30 days of the completion date, whether or not there was tax to pay. This short reporting period generated a lot of late filing. Leading to penalties for taxpayers who weren’t advised of the change in the law, or in some cases were incorrectly advised by HMRC.
Current Capital Gains Tax Liability
Currently, CGT liability arises for UK residents upon the sale of a residential property. Such liability is declared through self-assessment tax returns. This is then Payable by 31 January following the tax year in which the gain arises.
Changes to Capital Gains Tax Conditions
Under the new conditions, the calculations of the amount payable will change. It will now take into account an individual’s annual exemption and any unused losses that may be available. A “reasonable estimate” of the individuals yearly income will be made to calculate CGT liability. This calculation will need to be made due to the effect of income levels on the CGT rate to be applied.
For disposals by UK residents, the new reporting requirements will not apply where the gain on the disposal is not chargeable to CGT. This may be the case where the gains are relieved in full by principal private residence relief, or covered by the annual exemption or unused losses.
These reporting requirements will also not apply where the gain arises from the disposal of a foreign residential property. In a country covered by a CGT double taxation agreement or arises to a person taxed on the remittance basis.
