Property owners with taxable gains on their residential properties will be affected by the new rules from 6 April 2020. 

From that date, they must send a new standalone online return to HMRC and pay the tax due within 30 days of completion of the sale.

The new filing and payment timeframe is different from the current position where 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 CGT.

The current system means that, depending on timing of the sale, CGT is due anything from 10 months to 22 months after the sale or disposal.

In contrast, the new 30-day deadline means people have less time to calculate the CGT, report the gain and pay the tax.

The new return will need to be done online, requiring taxpayers to have a government gateway account to either submit the return themselves or to digitally authorise a tax agent to do it for them.

John Bunker, chair of CIOT’s private client UK committee, said: ‘This is a seismic change for property owners with taxable gains on their residential properties.

‘Rather than thinking about an annual compliance process, property owners need to have their records up to date in advance of the sale so that the 30-day deadline can be met and penalty charges avoided.

‘Make sure that full property details are all readily to hand including the date when the property was acquired, the acquisition cost and details of any improvements made over the period of ownership. In some cases, professional valuations may be needed.’

Calculating the CGT due to HMRC will require the property owner to make a reasonable estimate of the tax payable; this is because the rate of CGT will depend on the taxpayer’s income in the whole tax year.

Taxpayers must estimate their income for the year so that the correct CGT rate of 18% or 28% is applied.

CIOT points out that this may not be a problem where income is steady and predictable but more difficult if income levels are uneven or more than one property is sold in a year, so affecting the overall CGT due. 

Bunker said: ‘Owners that are likely to be affected are those selling second homes or buy to lets with taxable gains. They will need to be ready for the new deadline.

‘Homeowners who have lived in their house for the whole of period of their ownership are usually covered by CGT private residence relief which means no taxable gain arises on sale. For those homeowners nothing changes because there is no gain to report.

‘However, for homeowners who have let their property or moved out for long periods before selling the tax rules can be complex. New rules were announced at Budget 2018 for lettings relief and a reduction in the final qualifying exempt period of ownership from 18 months to nine months from April 2020.’

Policy paper Capital Gains Tax payment window for residential property gains