In his Budget 2021 speech, the Chancellor reset the Capital Gains Tax clock for paying tax on disposals of UK land and property. The 30-day CGT window has now been extended to 60 days.
Before the Budget announcement, UK residents had a 30-day window to report any gains and pay any tax due, after completing the disposal of residential property. Sellers disposing of non-residential UK property faced a similar deadline, with a requirement to report the disposal, whether tax was due or not.
The 30-day CGT regime is relatively new. However, there have been considerable teething problems, and penalties of over £1.3 million were awarded for late-filed returns in 2020. This has been blamed, in part, on low public awareness of the new rules. There have also been concerns raised by professional bodies that the window does not allow sufficient time to prepare accurate figures, especially in complex cases.
The new 60-day CGT window
The Budget extended the deadline for paying tax on gains to 60 days from completion. This applies for any disposals completed on or after 27 October 2021.
Where a property has mixed-use, the 60-day window applies to the residential element only.
Principal Private Residence Relief
For UK residents, the 60-day window for reporting is only applicable where the sale results in a taxable gain. Disposals will not be liable for CGT in every case. Where a property is always occupied as the only or main residence, Principal Private Residence Relief can be claimed, removing the requirement to pay CGT.
The new 60-day window is more likely to affect:
- Disposals of second homes
- Disposals by landlords
- Disposals by divorcing couples.