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Property owners warned of ‘seismic’ tax change

Owners of second homes or buy-to-let properties are being warned to brace themselves for a "seismic shift" in how capital gains tax is paid.

New rules are set to kick in for people who exceed the capital gains tax-free threshold by selling residential properties from 6 April 2020.

The rules do not apply to the sales of main residences, which are usually covered by private residence relief.

Gains that are liable to the tax from an additional residential property sale must submit a new online capital gains tax return.

Furthermore, any capital gains tax owed from the transaction needs to be paid within 30 days of the sale going through.

Taxpayers currently have until the self-assessment deadline after the tax year the sale was completed to send in a return and pay any tax.

Depending on the time of the sale or disposal, capital gains tax could be due any time between 10 and 22 months after the deal was done.

From the spring, the new 30-day payment window will mean taxpayers have considerably less time to report the gain and pay the tax.

John Bunker, chair of the Chartered Institute of Taxation's (CIOT) private client UK committee, said:

"This is a seismic change for property owners with taxable gains on their residential properties.

"For homeowners who have let their property or moved out for long periods before selling, the tax rules can be complex.

"New rules for letting relief and a reduction in the final qualifying exempt period of ownership from 18 months to nine months start in April 2020.

"Rather than thinking about an annual compliance process, property owners need to have their records up to date in advance of the sale so that the 30-day deadline can be met and penalty charges avoided."

The CIOT expects more details, possibly in the Spring Budget on 11 March, before the changes come in.

We can ensure you comply with the new rules.