Buy-to-let landlords face ‘seismic’ CGT tax change

Buy-to-let landlords or other property owners could clock up financial penalties due to ‘seismic’ changes to the capital gains tax payment rules, tax expert Imogen Lea from Clarke Willmott LLP has warned.

From April 6, anyone who sells a residential property giving rise to a capital gain on which CGT is payable, will be required to make a digital return to HMRC and to pay an estimate of the CGT due within 30 days from the sale completing.

People can no longer keep the money in their hands for up to 22 months after selling the property.

Lea said:

“This is a very big change and could easily catch people out.

“Interest on the unpaid tax and other financial penalties will be due if the rules are not followed.

“The risk of such a tight turnaround is people being unaware of the changes and failing to comply. They need to be aware of the vastly reduced time limits and to be ready to make the return and estimate the CGT due.

“CGT computations are not always straightforward which could mean that if people are not prepared, they might not be able to collate the information necessary to make the CGT calculation in time.”

The changes potentially affect owners of holiday homes, buy-to-let properties, main residences which have been let out at some point, owners of homes with grounds in excess of half a hectare, and owners of houses which have been partly used for business purposes.

The changes do not apply on the sale of a person’s main residence.

Lea added:

“Gains are not always straightforward to calculate – if an owner has made improvements to the property the cost of these will be deductible from the capital gain, but if there have been numerous improvements over many years it may be challenging for the client to find all the supporting documentation.”

She urged property owners to start compiling the required information and to think about the CGT position as soon as the property goes on the market.

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