At present, when you sell a second property you have some time before the capital gains tax(CGT) is payable.
For example, selling a property in July 2018 would fall into the 2018/19 tax return – the tax would not be payable until 31st January 2020.
However, from April 2020 HMRC is planning to bring in new rules that make the time to pay much shorter… actually making you pay the capital gains tax within 30 days from completion.
This only applies to second properties, as generally people’s main residence is usually exempt from capital gains tax provided they are entitled to full relief.
With the changes to mortgage interest relief on let second properties, as well as stamp duty changes, there are now many disadvantages.
One large issue with in-year reporting of capital gains tax is that you will not know the full position for the year and the applicable tax rates:
– perhaps further capital gains will be made in the year
– perhaps employed or self-employed income will increase before the end of the tax year.
– perhaps a further property will be sold during the year, incurring a loss that could be offset against the first gain.
– or, income could be reduced from initial expectations when submitting the CGT return.
There could therefore be adjustments required to the tax paid – these will only be known at the year-end, so it is important that people complete their tax return as soon as possible after the tax year ends.