Landlords selling investment properties used to have between 10 and 22 months to pay their Capital Gains Tax bill, but this has now been drastically cut.

Property owners are being warned not to fall foul of new tax rules that have slashed the payment window for capital gains tax on property sales to just 30 days.

The Chartered Institute of Taxation (CIOT) advises those with taxable gains on their residential properties to plan for a ‘seismic change’ in how tax is paid.

From 6 April 2020, UK residents selling a residential property that produces a capital gains tax liability will need to send a new standalone online return to HMRC and pay the tax due within 30 days of the sale’s completion.

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Currently, taxpayers have until the Self Assessment tax deadline of 31 January after the tax year in which the disposal is made to complete a tax return and pay the tax.

The current system means capital gains tax is due anything from 10 months to 22 months after the sale or disposal. The new 30-day deadline means people have less time to calculate the tax, report the gain and pay up, warns the CIOT.

John Bunker, chair of CIOT’s Private Client UK Committee, says:

“Owners likely to be affected are those selling second homes or buy to lets with taxable gains. “This is a seismic change,” says Bunker.

“It is essential that people plan ahead to meet the new deadline or risk penalties.” He advises:

“Make sure that full property details are all ready to hand including the date when the property was acquired, the acquisition cost and details of any improvements made over the period of ownership.”

Property owners will need to make a reasonable estimate of the tax payable because the rate will depend on their income in the whole tax year. CIOT says this can be more difficult if income levels are uneven or more than one property is sold in a year, which can affect the overall amount due. 

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