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Plans to give landlords more time to pay capital gains tax

2-minute read

Mollie Millman

25 June 2021

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Landlords could be affected by extra changes being proposed to capital gains tax.

The Office of Tax Simplification (OTS) has made a range of additional suggestions to the government, including an extension of the time allowed to make the payment.

Landlords are required to pay capital gains tax on properties that are not their main residence.

Capital gains tax changes – what's being proposed?

The latest proposals come on the back of suggestions already made by the OTS.

Last November, it told the government that capital gains tax should be increased in line with income tax rates.

Capital gains tax is a tax on the profit of an item sold that has increased in value. It’s the gain that’s taxed rather than the amount of money received.

Extension of the payment window

Now the OTS is suggesting that the payment window for the tax is extended beyond the current 30-day timeframe.

It recommends that the timeframe is doubled to 60 days.

The current 30-day deadline was introduced in April last year. Before that, you didn't need to report or pay capital gains tax until you filed your Self Assessment – meaning in some cases, it wasn't due for 22 months.

The OTS highlighted that a third of property owners liable to pay the tax had failed to file their payments on time due to the restrictive deadline.

Around 150,000 people sell a residential property in the UK each year, 85,000 of whom have a taxable gain and need to file a property tax return within 30 days. Even with adequate awareness and preparation, the OTS considered that 30 days was a challenging deadline.

A total of 16,800 of 51,300 returns made between 6 April 2020 and 6 January 2021 had failed to meet the deadline, according to HMRC.

Landlords need to meet legal deadlines

Chris Norris, policy director for the National Residential Landlords Association, said: “Landlords should always ensure they meet all legally required deadlines to pay tax.

“That said, today’s report from the OTS demonstrates a woeful lack of communication and consideration by HMRC about what is expected of those liable for the tax. It adds weight to the argument that the seemingly arbitrary, 30-day deadline has created more problems than it solves.

“We would support the OTS in recommending an extension to 60 days to avoid landlords missing a shorter deadline, potentially through no fault of their own.”

Private Residence Relief takes main homes outside the scope of capital gains tax.

Where taxpayers have more than one eligible home, they can choose which home they wish to benefit from the relief by making a nomination to HMRC.

What do you think about the proposals? Let us know in the comments.

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