Owners of second homes and buy-to-let landlords are likely to have a shorter period to pay any capital gains tax (CGT) which arises on disposals, under planned changes from 2020.

HMRC are considering responses to a consultation on introducing the new payment window.  The planned new rules will not affect disposals where full private residence relief is available.

Normally, when an individual or a trust sells, gifts or transfers a property, gains or losses are reported to HMRC via a self-assessment tax return, with any CGT due then being payable on 31 January following the tax year of disposal.  This can allow property owners up to 22 months after the sale of the property before the CGT is due for payment to HMRC.

The planned new rules will require individuals and trustees disposing (by sale, gift, transfer, or appointment) 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.

CGT computations can be quite complex, with a need to establish historic facts, such as periods of occupation, enhancement expenditure, base costs and whether and to what extent any CGT reliefs are available.  How the payment on account to be made within 30 days is to be calculated is part of the consultation.

If you would like to discuss the planned changes, or property tax and CGT generally, please contact our private client team on 01788 539000.