Buy-to-let tax changes capital gains tax

Proposed capital gains reforms for property sales in the UK

The Office for Tax Simplification (OTS) has proposed some reforms to capital gains tax. What could these mean for landlords and property investors?

The UK tax system is constantly under review by the Treasury and the government. This ensures different types of tax are fit for purpose. Capital gains tax impacts hundreds of thousands of businesses and individuals alike, including landlords and property investors.

Recently, the OTS published its second report on reviewing capital gains tax. It sets out what HMRC could potentially do to improve understanding of CGT among taxpayers. Additionally, the report sets out reforms to help taxpayers meet their reporting and paying obligations. With property transactions at record levels, it’s especially important for sellers to be aware of their tax obligations.

Timothy Douglas, policy and campaigns manager at Propertymark, says: “Due to the impact of property tax holidays across the UK, property buyers continue to fuel the post-Covid economy. Nevertheless, many people have limited awareness or understanding of Capital Gains Tax. Knowledge of the rules is particularly important when selling a buy-to-let property or a second home.”

At this point, it is unclear if the government will make these changes. Property investments make up a major proportion of capital gains tax revenue. If changes are on the horizon, this will impact landlords and the property market as a whole.

There are also rumours that the tax rates for capital gains could be changed in the Autumn Budget. In the past few years, there have been a number of tax changes in the private rented sector. Because of this, it’s particularly important for property investors to stay on top of the latest changes.

Extend the reporting and payment deadline

Last year, a tighter payment deadline was brought forward for capital gains on property sales. From April 2020, sellers have had to pay the full amount owed within 30 days of completion of the sale.  Previously, capital gains was usually paid the following tax year through self-assessment tax returns.

The report by OTS recommends extending the reporting and payment deadline from 30 to 60 days. This would give taxpayers more time to meet their tax duties. The report considers the 30 day-deadline to be difficult for many sellers.

Improve understanding of the tax

The OTS also recommends mandating property professionals, which could include conveyancers, estate agents and/or auctioneers to distribute HMRC-approved standard information packs. These would provide customers with information whenever a residential property is listed or instructions provided to conveyancers.

Together, the extension and information pack could provide taxpayers help and the time to proactively plan for what they need to report and pay for capital gains tax well before the deadline.

Timothy Douglas states: “In response to the recommendations, Propertymark would support extending the reporting and payment deadline because this would allow more people to comply with the rules.

“However, agents already provide a lot of information to consumers, so any plans to mandate information packs must be well-coordinated with UK Government reforms for home buying and selling as well as differing rules and regulations across the UK, in particular, the Home Report in Scotland.”

The government will now consider these recommendations. Many of the UK’s property investors and landlords will eagerly await to see if the government announces any changes to capital gains tax this year.

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