30-day window to pay Capital Gains Tax on residential property sales

Since April 2020, any Capital Gains Tax due on the sale of residential property must be paid within 30 days. We have seen a number of cases recently where vendors have not been made aware of the requirement by their solicitors or agents.

Although the new deadline has been in effect since April, it seems that it is not always being communicated during the sales process. In recent weeks, we have assisted several clients to complete the required ‘residential property return’ and pay any tax due. Their liability for Capital Gains Tax has only come to our attention when completing annual returns – in most cases after the 30-day deadline has passed.

Who is affected by the changes to CGT on property disposals?

Any individual, trustee or personal representative realising a taxable capital gain from the sale or other disposal of UK residential property will be obliged to complete a residential property return and pay Capital Gains Tax on account within 30 days of completion.

In cases where the gain is not taxable – for example, if it is covered by Principal Private Residence relief – it will not be necessary to make a return.

If tax is not paid within the 30-day deadline, interest and penalties will be charged.

Why is this change significant?

Under the previous rules, CGT had to be paid by 31 January of the tax year following the year of disposal. The new deadline is, therefore, a huge reduction in the time allowed between selling a residential property and paying the tax.

The 30-day CGT payment window could lead to problems in cases where calculating the capital gain is complex. However, the new rules allow for certain estimates and assumptions to be made in calculating the payment on account. Taxpayers who fall within Self Assessment must also report the capital gain on their annual tax return in addition to completing the 30-day residential property return.

Please get in touch if you have recently sold or are selling a property and you believe tax may be due on gains from the sale.