From April 2020 there is more bad news afoot for landlords, as if there hasn’t been enough already in the past few years.
Investors in residential buy to let property who sell for a capital gain will need to make a payment on account towards the total Capital Gains Tax bill within 30 days of sale (from completion). This will naturally have a severe impact on cash-flow.
Currently capital gains under self-assessment is not due till the 31st January following the end of the tax year. So a gain made on disposal on 18th February 2019 (18/19 tax year) would not be due till 31st January 2020. In some cases this means there can be a gap of almost 22 months from sale to payment of tax.
Whilst this is generous, there is practicability involved in the reasons for this. Often CGT is triggered on exchange of contracts, meaning there is often a considerable length of time between the exchange date and the seller receiving funds. Also, CGT may also be due when no proceeds are due, i.e. where a property is gifted or sold at undervalue.
Working out tax due
As a result of the above changes it is important to ensure your capital gains tax liability is calculated within a much shorter timeframe to be able to pay the payment on account. The calculation of capital gains can often be a time consuming process, especially where the property was purchased a long time ago and associated documents need to be traced or found!
Are SPVs effected?
UK resident companies are not yet subject to this regime.