Capital gains tax (CGT) is currently declared when taxpayers fill in their self-assessment tax returns. This can give an individual selling a property between 10 and 22 months to submit any tax that may be owed from the sale as they wait for the next self-assessment tax return deadline.
Incoming changes are going to vastly reduce the amount of time an individual has to declare their CGT, however. The government intends to impose a ruling that will make any individual receiving a capital gain submit a provisional CGT return within 30 days of the property’s disposal. Individuals in question will also be required to make a provisional payment within these 30 days.
This provisional CGT return will be in addition to any CGT declarations on the self-assessment tax return each year, it won’t be replacing it.
Each tax year is considered to be isolated and all incomes, gains, reliefs, deductions and losses can only be reliably calculated into a how much tax is owed once the year is close to an end. This is why the CGT will need to be declared provisionally as well as yearly.
It has been argued that there is no system in place to account for capital losses later on in the year if you have already paid CGT on capital gains. This could be a major inconvenience for the taxpayer who could be losing money, or waiting a long time for money to be returned.
Enforcement of the new rules begins on 6 April 2020.
Any uncertainties about capital gains tax should be discussed with an expert. Contact MD Consulting.