Capital Gains Tax  

Budget 2021: CGT property payment window doubled

Budget 2021: CGT property payment window doubled

Capital gains tax for residential property transactions can now be paid within 60 days, following calls for the 30-day payment period to be doubled due to unsuspected homebuyers being hit with fines.

Both UK and non-UK residents are included in the tax deadline extension, announced in chancellor Rishi Sunak's Budget today (October 27).

The fine for not paying CGT within 30 days of a residential property sale was £100, and after six months this fine jumped to 5 per cent of the gain.

CGT is paid on any annual gains over £12,300. HMRC introduced the 30-day tax payment window in April 2020. Previously, gains could be reported in a self-assessment tax return in the tax year after the property was sold.

The 30-day deadline, which ends today, has netted the Exchequer an increased revenue of £935m over the tax year 2020-21.

The government said its decision to extend the deadline will ensure taxpayers have "sufficient time" to report and pay CGT.

It credited a recommendation made by the Office of Tax Simplification in May 2021, which warned many taxpayers only find out about their obligations after they have sold their property.

The Association of Accounting Technicians has also been campaigning for the deadline change. In its Budget submission, submitted last month, the accounting body criticised the “unreasonable” nature of a period as short as 30 days to pay CGT following a residential property sale, highlighting a “lack of awareness” of the timeline amongst those affected.

Chartered accountant Mark Harwood said: “The 30-day deadline is very tight when you’re dealing with the sale of a property, which can drag on, only to find out that you’ve got to register, calculate the tax, pay the tax, etc. within 30 days."

Tim Walford-Fitzgerald, a private client partner at accountancy firm HW Fisher, said the government's decision to give house buyers more time to pay the tax was "welcome news".

"It is positive to see that the chancellor has recognised the reality of these transactions," he added. "To anyone selling a property and up against tight deadlines to receive registrations you can breathe easy.”

Many had predicted CGT rates to rise in line with income tax rates, following a report published by the OTS in November 2020. The OTS said the current CGT structure “distorted behaviour” and was often counterintuitive with “odd incentives”.

The review, commissioned by Sunak himself in July 2020, blamed the tax's faulty structure on the disparity between CGT and income tax rates. 

But Sunak held back on any CGT rises in today's Budget, following on from his freeze of CGT annual exemption and the IHT thresholds until 2026 in his March Budget.