Persons selling rental properties or other owners could face financial penalties as a result of significant changes to the rules for paying capital gains tax.
From April 6, anyone selling a residential property that results in a capital gain on which CGT is due will be required to make a numerical declaration to HMRC and pay an estimate of the CGT due within 30 days of completion of the sale.
Individuals can no longer hold the money in their hands until 22 months after the property has been sold.
This very big change could easily get people out. Interest on unpaid taxes and other financial penalties will be due if the rules are not followed.
The risk of such a short timeframe is that people will not be aware of the changes and will not comply with them. They need to be aware of the significantly reduced timeframes and be prepared to file the return and estimate the CGT due.
CGT calculations are not always straightforward, which could mean that if people are not prepared, they may not be able to gather the information needed to complete the CGT calculation on time.
Would you be affected by the change of Capital Gain tax?
The changes may affect owners of vacation homes, rental properties, principal residences that have been rented at some point in time, owners of homes with more than half a hectare of land, and owners of homes that have been partially used for commercial purposes.
The changes do not apply to the sale of a person’s principal residence.
Gains are not always easy to calculate – if a homeowner has made improvements to the property, the cost of the improvements will be deductible from the gain in value, but if there have been many improvements over many years, it may be difficult for the client to find all the supporting documents.
It is necessary for owners to start gathering the required information and considering the CGT’s position as soon as the property is put on the market.
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