Capital gains tax payment deadline missed by one-fifth of property investors

That’s following a freedom of information request filed by the Financial Times to HM Revenue and Customs (HMRC), which showed 26,500 individuals missed the capital gains tax (CGT) filing deadline in 2021-22, compared with 25,300 in the previous tax year.

The rise in overdue CGT payments is despite the extension to the reporting deadline, following the implementation of a new CGT reporting system.

In April 2020, UK resident property investors and second homeowners liable for CGT on residential assets had to pay and declare their taxable gains within 30 days of the sale. Under the legacy CGT reporting system, individuals had a maximum of 22 months to settle up.

The 30-day payment deadline for the first tax year of the new reporting system was doubled to 60 days in October 2021, with some claiming the 30-day window to be too tight, as well as a lack of awareness surrounding the new reporting system.

Non-UK residents are required to report all disposals of UK land (not just disposals of residential property), whether or not they realise a capital gain. This requirement also extends to disposals of shares in property-rich entities. The rules for calculating the liability for non-UK residents are also more complicated than those for UK residents.

Bill Dodwell, tax director, Office of Tax Simplification (OTS), believes HMRC should “do more to help taxpayers” to improve the efficiency of the new reporting process.

Mr Dodwell feels HMRC could involve “conveyancers in passing on HMRC information” to reduce the burden on property sellers.

For those individuals who have to make a return, you will have 60 days from the date of conveyance to report your disposal and pay any due CGT. You risk a late filing penalty and will be charged interest if you do not do this by the 60-day deadline.

The later the submission, the greater the fine.

Fixed penalties of £100 are awarded for delays of up to six months, with additional £300 penalties or 5% of any CGT due charged on submissions that are 6-12 months late. Any submissions that are more than a year overdue will be hit with a further £300 penalty or an additional 5% of any CGT owed.

HMRC said that it was keen to support eligible taxpayers in adapting to the shorter timeframe for reporting and payment. A spokesperson for the tax authority said it had distributed “communications to customers and stakeholders”, as well as “reaching out to industry press, engaging agents, hosting webinars for landlords and social media”.

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If you’d like support in meeting your CGT obligations ahead of an asset sale, we can help to prepare your computations, calculate liabilities and consider any potential reliefs you may be entitled to.

For a free initial consultation on your unique financial situation and the potential for CGT liabilities, pick up the phone and call us today on 0121 794 4888 or drop us a line using our online enquiry form and we’ll be in touch.

Date published 15 Sep 2022 | Last updated 20 Mar 2024