The deadline to meet Capital Gains Tax payments after selling property has changed a couple of times in the last couple of years. The Chancellor included a change from 30 to 60 days in his Autumn budget, so let’s take a look at Capital Gains Tax and what landlords are required to pay.
What is Capital Gains Tax? (CGT)
Capital Gains Tax on properties doesn’t apply to main residences, it only applies to second homes and buy-to-let properties. This means it’s payable by landlords, whenever they sell a property. The amount due is worked out based on the increase in the property’s value, so it’s the gain that’s taxed, not the overall value.
The current threshold for Capital Gains Tax is £12,300 per year and is charged at a rate of 28% for higher rate taxpayers and 18% for basic rate taxpayers.
Capital Gains Tax allowance freeze
The Chancellor announced a freeze in the allowance back in March 2021, a move that’s predicted to raise a 47% increase in all Capital Gains Tax paid by the year 2026. This would take CGT income from £9.8 billion per year to £14.4 billion per year.
Increase in the timeframe for payment
This means that if you sold property between 6 April 2020 and 21st October 2021, you had 30 days to declare and pay your Capital Gains Tax. However, in his autumn budget 2021, the Chancellor announced that he would take the recommendation from the Office for Tax Simplification (OTS) and double the payment window to 60 days.
The OTS recommendation was based on HMRC figures showing that one-third of eligible property owners failed to pay their CGT on time between 6 April 2020 and 6 January 2021. This amounted to 16,800 failing to meet the deadline.
It was found that not everyone was aware of the 30-day deadline (previously, CGT could be submitted and paid with self-assessment tax returns at the end of the tax year.) and even if landlords were aware of the requirements and fully prepared, in many cases 30 days was not adequate to meet the deadline.
One factor that made meeting the deadline difficult, was the demanding property market. Solicitors and conveyancers were busy dealing with an unprecedented workload and trying to clear backlogs of work, which made the 30-day deadline nearly impossible in some cases.