When a landlord sells a rental property they normally have until the following January after the tax year it was sold to calculate the profit made and pay the Capital Gains Tax (CGT). HMRC have introduced a fundamental change in the administration of the Capital Gains Tax (CGT) due when selling a UK residential property.
From 6 April 2020, when a landlord sells a property they will need to report the sale to HMRC and make the payment of CGT to HMRC within 30 days.
A new residential property return and payment on account of CGT will need to be made within 30 days of the completion of the sale. A residential property return is not required where the gain on the sale is not taxable, for example, if its a main residence but otherwise interest and penalties will be charged by HMRC if the deadline is missed.
An added complication is, the relevant date of disposal for CGT purposes is the exchange of contracts date, whereas the 30 day payment window runs from the date of completion.
The new rule does allow certain estimates and assumptions to be made in calculating the payment on account. Taxpayers who are within the self-assessment system will have to report the capital gain on their annual tax return as well as completing the 30 day residential property return.
It would be good to start getting your paperwork in order now if you intend to still own a second residential property after 6 April 2020. Make sure you have your original completion statement for the purchase and any invoices that relate to improvement work completed on the property, so that you can meet the 30 day deadline.