UK budget 2021: Capital gains tax deadline on British properties extended

Doubling of property payment window applies to UK residents and overseas buyers

Chancellor of the Exchequer Rishi Sunak has extended the deadline to file a Capital Gains Tax return for those selling UK residential property in his autumn budget.

CGT on property sales ranges from 18 per cent to 28 per cent depending on the rate band, with sellers required to inform HM Revenue & Customs (HMRC) about the sale and pay any tax on the capital gain within a certain time period.

Under the revised rules, UK residents and overseas buyers now have 60 days to comply with CGT rules after completion, doubling the existing 30-day deadline. The new ruling is effective immediately.

“This will ensure that taxpayers have sufficient time to report and pay CGT, as recommended by the Office of Tax Simplification (OTS),” said the Treasury.

“When mixed-use property is disposed of by UK residents, legislation will also clarify that the 60-day payment window will only apply to the residential element of the property gain.”

The Autumn budge saw Mr Sunak unleash a wave of spending including sizeable investments in the transport and health sectors, as well as an increase in the minimum wage and the removal of a pay freeze on public sector pay.

While he did not specifically mention CGT in his budget speech in the House of Commons, the details of the change were contained in the budget document.

This change was a relief for many property owners who were expecting Mr Sunak to increase CGT in line with income, a recommendation made by the OTS, although the levy had already been frozen until 2026 in the last budget.

For now, that proposal “remains unrealised” said Myron Jobson, personal finance campaigner at Interactive Investor.

“The only mention on capital gains tax was in the budget document and is not what many expected. However, the Government has done little to dispel the impression that nothing is of off the table to balance the books,” said Mr Jobson.

“It is no secret that the government needs to raise a significant amount of money to foot the World War Two sized bill to foot the cost of its coronavirus economic support packages. The reality is we will have to pay for it some way or another — either by taxes going up or by spending being cut or, most likely, a combination of both.”

Tim Walford-Fitzgerald, private client partner at accountancy firm HW Fisher, said the change in the deadline for filing a tax return was welcome news.

“It is positive to see that the Chancellor has recognised the reality of these transactions. To anyone selling a property and up against tight deadlines to receive registrations you can breathe easy,” Mr Walford-Fitzgerald said.

Capital gains is the profit made when an asset such as property is sold for more than it cost to acquire, with the tax payable on any annual gains over £12,300.

HMRC introduced the 30-day tax payment window in April 2020, with the fine for not paying the tax within the deadline on a residential property sale set at £100, which jumps to 5 per cent of the gain if not paid after six months. In the past, any gains could simply be reported in a self-assessment tax return in the tax year after the property was sold.

The 30-day deadline has delivered £935m in revenue to the Treasury over the tax year 2020-21, up four-fold from the £2.5bn achieved a decade ago.

Some campaigners say wealth taxes should be the target, as a fairer way to pay for pandemic spending, with billions of pounds potentially raised if the government increases the low tax rates on profits from shares and property, bringing them back into line with taxes on salaries.

Torsten Bell, head of the Resolution Foundation think tank, said “there is big money in the capital gains tax system".

“The government should target well-used exemptions in the Capital Gains Tax regime that save wealthy investors about £8bn a year, including a £2.3bn saving by those who die before their gains are taxed,” Mr Bell said.

The think tank said equalising the tax rate on capital gains with income tax could deliver a revenue boost of at least £90bn over five years.

However, the government has already broken its pledges on National Insurance and the state pension triple lock, with National Insurance contributions set to go up by 1.25 per cent in April next year, while the state pension triple lock was suspended for a year.

Updated: October 29th 2021, 8:16 AM