Under current rules the capital gains tax on disposal of residential property is due by the 31 January following the tax year of disposal, which gives owners up to 22 months after the sale of the property before payment of tax is due.
However, HMRC is planning to bring in new rules from April 2020 which will require payment on account of the CGT within just 30 days of the completion of the sale, leaving for far less time for sellers to calculate, report and pay the tax.
Given that it often takes time to establish all the necessary facts to make an accurate computation of the taxable gain sellers will need to gather all relevant information – eg, historic costs, dates of occupation - well in advance of a sale.
The new rules will inevitably increase the compliance burden for taxpayers because the applicable tax rate for CGT depends on an individual’s total income for the tax year, other capital disposals (whether resulting in a gain or loss) will also affect the position. It will therefore be necessary to review and revise the computation at the end of the tax year, most commonly as part of the usual self-assessment process.