After calls for the 30-day payment period being doubled to compensate for unsuspected homebuyers who were hit with fines, capital gains tax on residential property transactions can now be paid in 60 days.
Non-UK and UK residents are both included in the extension of tax deadline, which was announced in Chancellor Rishi Sunak’s Budget on 27 October 2021.
After 30 days, the fine for failing to pay CGT was £100. The penalty increased to 5% after six months.
Any annual gain exceeding £12,300 is subject to CGT. HMRC established the 30-day time period for tax payment on April 2020. Earlier, gains could have been reported on a self-assessment return tax return for the tax year following the sale of the property.
Today, deadline of 30 days has ended and the Exchequer has a higher revenue of £935m in tax year 2020-21.
According to the government, the extension of the deadline will allow taxpayers to submit and pay CGT in adequate time.
It also credited the Office of Tax Simplification’s May 2021 recommendation, which warned that many taxpayers would only learn about their obligations once they have sold their property.
The Association of Accounting Technicians also supported the change in deadline. The Association of Accounting Technicians submitted its Budget last month. It criticized the unreasonable nature of a 30-day period to pay CGT after a residential property sale. This highlighted a lack of awareness about tax due date among those affected.
When you are dealing with the sale of property, the 30-day deadline is not easy to meet. Registration with HMRC, calculation and payment of tax, completing all these within 30 days is very tough.
It is encouraging to see that the reality of these transactions have been recognized by the chancellor. Anyone selling a property or up against tight deadlines for receiving registrations can relax.
Many predicted that CGT rates would rise along with income tax rates. Sunak himself commissioned the review in July 2020. It found that the tax’s flawed structure was responsible for the difference between CGT rates and income tax rates.
Sunak, however, resisted any CGT increases in today’s Budget. This was in response to his March Budget freeze of CGT annual exemptions and IHT thresholds up until 2026.