From April 2020 a number of changes are being introduced to Capital Gains Tax. The changes, impacting the owners of residential property, centre on reductions in tax reliefs and changes to how Capital Gains Tax is collected by HMRC.
We look into one of the changes below.
Payment of your Capital Gains Tax liability
HMRC will begin collecting any Capital Gains Tax (CGT) you owe from the sale of a residential property with 30 days of the sale. The changes, which come into force in April 2020, will see the CGT payment deadline brought in line with the deadline which is already in place for non UK residents.
Under the current rules, taxpayers may have up to 21 months before they are required to pay any CGT due to HMRC. When the new rules come into force, from April 2020 you will have just 30 days to submit a provisional calculation of the CGT you owe, and to pay your tax bill!
This could prove problematic for many taxpayers as the rate of CGT is dependent on your income level in that tax year – a tax year that will not have ended when you are required to pay your Capital Gains Tax. This will mean that tax payers will be required to estimate their income in order to work out how much CGT is owed at the 18% and 28% rates accordingly.
Once you have submitted your provisional calculation and paid any tax due, you will not be able to make any changes straight away, e.g. the offset of capital losses incurred later in the tax year. You will instead have to wait until the end of the tax year before changes can be made, either through your self-assessment tax return or by notifying HMRC.
Tax payers will also be hit with penalties if they miss the 30 day deadline or make errors in their provisional calculations. The details of these penalties have not yet been released.
If you think you will be impacted by the new CGT rules please contact us and we will be happy to discuss your tax position and what the changes may mean for you personally.