Second home owners and landlords warned of new tax deadline

Second home owners, landlords and property investors are being urged to beware a ‘dramatic change’ to the current capital gains tax regime which will come into effect in April next year.

The new rules mean that anyone selling a property after 6 April 2020 where capital gains tax is due will have to pay the tax on any gain within 30 days of completion – a significant change on the current position.

Hilesh Chavda, a legal tax specialist in Royds Withy King’s Private Wealth team, is urging owners of more than one property to carefully consider the impact that this might have.

He said:

“A dramatic change to the payment of tax on residential property gains will come into force on 6 April 2020.  Capital Gains Tax (CGT) in relation to residential property will need to be paid within 30 days of completion, which is a marked change from the current position.  At the moment, the CGT deadline is 31 January following the end of the year in which the sale was made which, in some cases, could be as long as 22 months.  Where CGT is due, the change could mean that sellers have to get funds in place to cover the CGT liability before the sale is completed as 30 days is not very long at all.  This could be a particular issue where there are large historic gains.”

Hilesh adds:

“Landlords, investors and second home owners thinking of selling one or more properties in the next couple of years are well advised to get professional advice at an early stage to make sure they understand and can meet their liabilities.  This will no doubt impact cash flow so it will be interesting to see what effect this has on the residential property market.  This is particularly true where sellers are also buying and have to pay Stamp Duty Land Tax within 30 days of competition.  Many may well be tempted to offload any surplus or underperforming properties in advance of April but whether they can do this successfully or not in today’s supressed market remains to be seen.”

This change will not affect sales of people’s principal home where no CGT is due.

Royds Withy King is the winner of the Managing Partners’ Forum Best Managed Firm 2019 Award. The firm has a dedicated Private Wealth team whose innovative legacy management portal Life Safe® won a Citywealth Award earlier this month.

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