Update – Payments of Capital Gains Tax on Property


It’s been a bumpy road for residential property recently, with numerous changes around stamp duty, capital gains tax (CGT) and income tax that have almost exclusively been to the detriment of both buy-to-let landlords and second homeowners.

In what is a significant yet little-publicised further revision, from 6 April 2020 HMRC roll out additional legislation whereby CGT on residential property disposals will be reportable and payable within 30 days of the completion date - a mechanism that is a noticeable departure from the current process.

Under the current system it is feasible that the CGT on a property sold on 6 April 2019 wouldn’t be payable to HMRC until 31 January 2021 – the move is therefore an attempt to address and mitigate this lead time which has clear implications to HMRC’s fiscal cashflow.

In summary, the logistics of the changes are that a ‘residential property return’ will need to be submitted to HMRC and an estimated liability thereon paid over within the 30-day post-disposal window.

With respect to the liability element this will work in a similar way to the current self assessment payment on account system whereby an estimated liability based on the expectations and information available to the taxpayer at the time (including deduction of personal allowances and the application of either the 18% or 28% CGT rate depending on their anticipated income levels that year) is calculated.

This should then be disclosed and remitted to HMRC within the required 30-day window, with a final balancing position determined and either additionally settled (in the case of underpayment) or repaid (in the case of overpayment) on completion of the self assessment tax return for the relevant tax year.

It is important to note that the legislation will only affect property disposals completed on or after 6 April 2020 – therefore if there is a transaction on the horizon that may fall either side of the tax year end, from a cashflow timing perspective completion prior to this date is likely to be beneficial as the old rules will apply.   

Furthermore, despite the relatively light publicity to date there is not expected to be a ‘soft landing’ of this legislation and it is anticipated that HMRC will seek to apply both interest and penalties for late submission and payment in line with the current regimes.

If you think these somewhat radical legislative changes may affect you, please contact our tax team who will be happy to explain further and assist with planning where necessary.