Buy-to-let landlords face shorter CGT payment window

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Owners of second homes and buy-to-let (BTL) landlords face a much shorter period in which to pay any capital gains tax (CGT) due on property sales from April 2020.

Where Capital Gains CGT is due, a disposal is normally reported to HMRC in a self-assessment tax return. Under self-assessment, any CGT must be paid by 31 January following the tax year of disposal.

The government has noted that (depending on the timing of the sale within a tax year) this allows residential property owners between 10 and 22 months after the sale of the property before the tax is due.

HMRC is planning to bring in new rules from April 2020 which will require individuals and trustees disposing of a residential property to make a payment on account of the CGT within 30 days of the completion of the sale. Sellers will have to calculate, report and pay the CGT that they believe is due within that window.

As an example, if an owner exchanged contacts for the sale of a house on 15 April 2019 and the sale completed on 15 May 2019, the existing rules would apply and mean that any CGT arising would be due on 31 January 2021. By contrast, under the proposed rules, an exchange of contracts on 15 April 2020 with completion on 15 May 2020 would mean that the CGT had to be paid by 14 June 2020.

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.