Industry expert comments on capital gains tax warning

Thanks to a property market boom, house prices across the UK have risen – this has led to an increased demand for property and encouraged competition between buyers.  Taxpayers looking to take advantage and sell property may find they are liable for Capital Gains Tax (CGT). Due to filing requirements it pays to be informed when selling a second home, or reducing the size of an existing property portfolio.

Despite the new filing obligation being introduced on 6 April 2020, HMRC issued £1.3M penalties for late filing last year. Under the latest requirements, the disposal of UK residential property has to be reported to HMRC within 30-days of completion if there is CGT to pay – the liability of which must also be paid within the same 30-day period.  

Marcus Nallon, Associate Tax Director at Azets commented: “Understanding the nature of the costs, such as enhancement expenditure incurred on the property, the availability of capital losses and reliefs such as principle private residence relief, together with special rules that can apply between connected persons, is crucial when determining the CGT liability. With many moving parts in confirming a final CGT figure, plus the added pressure of the relatively new short submission timeframe, it pays to start considering the CGT position early and speak to a specialist tax advisor before the property is placed on the market or soon afterwards. This will maximise the amount of time available to review the CGT position and avoid the risk of a penalty.”

Capital Gains Tax reform has been on the cards for some time but to date has not materialised to the extent many expected.  That said there have been some notable changes to existing rules recently that have restricted available reliefs. 

It will be interesting to see how the 1.25% increase in NIC and dividend rates from April 2022 will impact on any wider policy changes to CGT.  Private landlords running property businesses personally would be unaffected by the NIC and dividend rate increases so I could envisage a targeted increase in CGT rates, or further restrictions, for private landlords and second home owners.

Of course announcing a change could see a flurry of activity prior to the change coming in and it will be important not to miss the 30-day requirements.

Capital Gains Tax reform has been on the cards for some time but to date has not materialised to the extent many expected.  That said there have been some notable changes to existing rules recently that have restricted available reliefs.

It will be interesting to see how the 1.25% increase in NIC and dividend rates from April 2022 will impact on any wider policy changes to CGT.  Private landlords running property businesses personally would be unaffected by the NIC and dividend rate increases so I could envisage a targeted increase in CGT rates, or further restrictions, for private landlords and second home owners.

Of course announcing a change could see a flurry of activity prior to the change coming in and it will be important not to miss the 30-day requirements.

If you require further advice about Capital Gains Tax, please get in touch with your local Azets office.