Capital Gains from Buy-to-let properties will be subject to major changes to tax reporting (and paying) from April 2020. This will affect how and when you are required to report and pay capital gains tax. What is the full story and what do you need to know?
This article is about selling your buy-to-let. If you are buying one, you may be interested in this.
Currently capital gains made by individuals are reported through self-assessment tax returns. This means, for example, if you sell a buy-to-let property between 6th April 2019 and 5th April 2020 you must declare it on your tax return and pay the tax you owe no later than 31st January 2021. New rules will apply from 6th April 2020 meaning that the tax payable on certain types of gain will be due up to 21 months sooner. A recent report from HMRC shows that taxpayers likely to be affected by the new rules are not properly aware of the changes.
The new rules apply where tax is payable for gains made from the sale of a residential property located inside or outside the UK on or after 6th April 2020. You’ll have just 30 days following completion to submit a provisional calculation of the gains and pay the tax you estimate is due. You will still be required to declare the gain on your self-assessment and pay, by the usual self- assessment deadline, any CGT due over and above your provisional payment.
Estimating your CGT
To work out your provisional CGT bill you’ll need to estimate your taxable income for the year to determine how much CGT is payable at 18% and how much at 28%. Should you need any help or advice we are here to help just get in touch with us on(01509) 816150 – or via our website.
A taxable capital gain can be quite difficult to calculate because you need to know the original purchase price and date, the cost of any improvements made and the dates of any period when you occupied it as your private residence. Complications can also occur if you acquired part of the property during the period of ownership, possibly because of an inheritance or transfer.
Because it can take some time to collate the information, and because there are potential penalties, we recommend starting to get the information together as soon as possible prior to the sale. We can help by checking that you have the correct information and ensuring that the return is made within the time limits.
No going back
Once you have submitted your provisional calculation and paid the tax you won’t be allowed to reduce it. There will also be penalties (details aren’t known yet) for errors and failing to meet the 30-day deadline for reporting a gain and paying the taxes.
The new reporting deadline coincides with the cuts in the reliefs for capital gains on a sale of a residential property where it was your home. This will mean more taxpayers will be caught in the CGT net and so subject to the new 30-day deadline.
Another blog you may also be interested in…. Buy to let get it right from the start