26.03.2020

Don’t get caught out by Capital Gains tax changes

Rosy Hughes

 

Landlords and investors selling residential properties could get caught out by changes to a key tax next month.

The window to pay capital gains tax on sales of residential properties will be reduced by up to 22 months when new regulations are introduced from Monday, April 6.

Tax specialist Rosy Hughes expects many people will be caught off-guard by this change – particularly with the backdrop of current economic issues taking precedence.

From April 6, people will have only 30 days from completion of sale on a UK residential property, which is not a private residence, to file a return with HMRC and pay an estimate of the tax due.

Previously when a property was sold it had to be reported on a tax return – but the payment was not due until January 31 the following year.

The amount of tax payable on account is calculated based on the taxpayer’s circumstances at the date of disposal.  A tax return must still be filed at the end of the year to finalise the amount of tax due.

Rosy Hughes is head of private client tax at Burgis & Bullock, which has offices in Leamington Spa, Nuneaton, Rugby and Stratford-upon-Avon.

Rosy said: “It’s a huge cashflow timing difference and the key thing to emphasise is it won’t just affect landlords.

“It will impact anyone who disposes of a UK residential property that they haven’t lived in for their entire period of ownership.

“Originally we were made aware of this change in the Budget a few years ago. I think people will be caught off-guard by this change, even if they once knew about it, they may well now have forgotten.

“Suddenly people selling properties next month will need to have all the documents and figures in order right away, which is a lot to handle when selling a property.

“And non-adherence could lead to financial penalties from HMRC.”

Even if cash is not involved, for example with family transfers, there will be a requirement to file and pay an estimate of the capital gains tax within 30 days.

Rosy added: “At Burgis & Bullock we have clients who transfer properties between family members, there is no cash changing hands, but that is a potentially taxable event.

“If you actually sell the property then you’ve got the money to pay the tax, but for other transactions like these you are charged for tax and you haven’t got long to find the finance to pay.

“It’s too late to try and rush sales through now, but there is definitely a lack of awareness of this change.

“If individuals are unsure of their position or would like any further information they can contact a member of the Burgis & Bullock personal tax team for advice.”

 

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