x
By using this website, you agree to our use of cookies to enhance your experience.
award
award award
award award

TODAY'S OTHER NEWS

Vendors may have to estimate CGT on sales under new rule

A property tax specialist is warning that sellers of buy to lets or holiday homes may have to estimate their own Capital Gains Tax liability under a new government rule.

Andrew Goldstone, a partner in the London-based property legal company Mishcon de Reya, says this may happen if the timing of such a sale happens before the vendor knows their income for the financial year in question.

This idiosyncrasy comes up as a result of new rules government the payment of Capital Gains Tax on profits made when additional properties are sold.

Goldstone says the until recently, vendors of additional properties used to report the gain in their tax return and pay the tax by the usual January 31 deadline - in some cases meaning the payment could be 21 months after the sale. 

However now such vendors must report the gain and pay the tax within 30 days of completion with penalties and interest for late payers. 

In a newsletter to Mishcon clients he writes: “One problem is that the applicable Capital Gains Tax rate (18 per cent or 28 per cent), will depend on your income for that tax year. If the property sale is early in the tax year, you may not know what your income will be and hence the relevant CGT rate.”

Goldstone advises that sellers in these circumstance should “make a reasonable estimate” with any underpayment rectified at the time of the tax return.

He advises: “You will also need to calculate the gain before reporting it. You should do most of the preparation before a sale, including tracking down the purchase price, the SDLT you paid, and any other allowable capital improvement costs such as an extension. 

“If you gift rather than sell the property, the new rules still apply based on the market value at the date of the gift. That means you'll also need a professional valuation as well as cash from other sources so that you can compute and pay the tax within the 30 day deadline.”

icon

Please login to comment

Zero Deposit Zero Deposit Zero Deposit
sign up