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Capital Gains Tax: new 30 day payment rule

Updated: May 13, 2020

From 6th April, Landlords who sell their rental properties will have just 30 days to pay their tax bill otherwise could pay thousands in penalty fines.

Will it affect me?

Those who will be affected are Landlords who are selling properties that are not their primary residence, and which qualify for Capital Gains Tax (CGT). If you have a buy to let property or a second home which you're looking to sell, your property is likely to qualify if it has increased in value since you bought it.

Are there any changes to the rates?

The rates of 18% of gains for base rate taxpayers or 28% for additional and higher rate taxpayers remains the same but the change is in how long you have to file and pay the tax.

What are the changes?

Currently, any taxable gains do not have to be paid until 31st January of the next tax year. The gains can therefore be declared on the end of year self-assessment tax return, so no additional tax return is required. Under this current system, landlords have between 10 and 22 months to pay, depending on when in the year they made their sale. Under the new system, however, landlords will have just 30 days from the completion of the sale to send a one-off tax return to HMRC and then pay their tax on the sale of the property.

What are the penalties?

Landlords who don’t follow the new rules could rack up large fines without realising. There are fines for late filing of the one-off tax return and also for late payment of the tax itself. Reporting the tax after the deadline incurs a £100 penalty fine. Then, every additional day after 3 months adds an extra £10 to the fine, up to a maximum of 90 days (i.e. £900). If filing is over six months late, then an additional fee of 5% of the due tax applies. If filing is over 12 months late, then another 5% is added. In addition, paying the tax after the deadline incurs a further fine of 5% of the due tax at 30 days late, an additional 5% at six months late and a final 5% at 12 months late.

What can landlords do to make selling easier?

Sell before 6th April 2020: If you complete any sales before 6th April, then you will have the current, longer timeframe to pay your CGT.

Use a limited company: doing so will mean you pay corporation tax on sales, not CGT. But tax is just one of many factors to consider when creating a new company.

Get ready: Now that you know you will have just 30 days to pay, you will be able to get your accounts in order before making the sale, which should stop you from having to rush.

This article is for informational purposes only. To discuss your specific situation, we'd recommend seeking the advice of a solicitor, accountant or other professional qualified to advise on its subject matter.

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