Reporting of Capital Gains Tax has changed to 30 days
With Coronavirus dominating the headlines, one new ruling may have been overlooked, the change to Capital Gains Tax which sees a new 30 day filing and payment deadline for Capital Gains Tax on homes.
With a freeze on stamp duty and the property market picking back up, we could see a rise of penalties from HMRC in this area. The new ruling states when a residential property is sold and both the exchange and completion dates fall after 6 April 2020, the vendor must file an online return of any taxable gain arising, and pay the appropriate Capital Gains Tax due, within 30 days of the completion date.
Prior to the 6 April 2020, any individual who had made a Capital Gain on their house sale was obliged to include the details on their tax return for the year the sale took place. The Capital Gains Tax due would then need to be paid by the 31 January following the end of the tax year.
If Capital Gains Tax was due and it was not paid within the 30-day deadline an automatic late filing penalty of £100 will apply. If the return was more than three months late, daily penalties will apply and then a fixed penalty of £300 at 6 and 9 months will be applied.
In order to allow the new system to settle in, there was a grace period up to the 31 July 2020, so any transaction completed from 6 April 2020 to 30 June 2020 needs to have been reported by the 31 July 2020.
A reasonable estimate of the Capital Gains Tax payable on the house sale needs to be made, as if the tax year ended on that date. This means the individual will need to estimate their taxable income for the year due to ensure the correct rate is paid. There are many factors to consider when estimating the amount of Capital Gains Tax owed, so it is always advisable to seek professional advice to ensure no penalties or interest are applied.
The friendly team at Clear Vision can provide support in calculating your Capital Gains Tax ensuring you file your tax on time, get in touch here.