Capital Gains Tax – the 30 day rule
New rules will apply from 6th April 2020 requiring the payment of capital gains tax, in relation to second and let properties, to be paid within 30 days from the date of the disposal (whether by sale or gift). Following the changes landlords and second home owners will have to file the details of the sale/gift of the property and pay the tax due within the 30 day period. Failure to report the gain and pay the tax will result in penalties.
A summary of the new position:
- If you make a capital gain in 2019/20 (before the new rules come in) the capital gains tax is due by 31st January 2021
- For the sale/gift of a house which is let or a second property, where exchange of contracts has taken place after 5th April 2020, the capital gains tax is due within 30 days. For example, if completion takes place on 11th May 2020 the capital gains tax will need to be paid by 10th June 2020.
- Only losses that have been accrued by the time of the sale/gift can be taken into account and offset against the gain when calculating the tax due.
- One difficulty in the calculation is knowing what rate to apply to the gain – a basic rate tax payer is liable at 18% and a higher rate tax payer at 28%. However, whether you are basic or higher rate depends on the level of your annual income.
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