Welcome cash flow relief when selling property

In the 2021 Autumn Budget, which was held on 27 October 2021, the Chancellor Rishi Sunak announced the welcome news that the reporting deadline for completing a Capital Gains Tax return when selling a property or other large assets has been extended from 30 days to 60 days, with immediate effect.

What this means in practice is that if you sell a property that is not your main home, perhaps a rental or investment property, you are legally obliged to file a Capital Gains Tax return with HMRC AND pay any capital gains tax due within 60 days of the sale completion date.

Previous to the announcement, property sellers had struggled to meet the 30 day deadline and many have been penalised for late submission of the tax return as well making their capital gains tax payment.

What if I already complete a self assessment tax return?

The Capital Gains Tax return is a different from the Self Assessment Tax return; it is a standalone tax return solely used to declare capital gains on selling assets that are worth £6,000 more.

So if you already complete a self assessment tax return, you still need to create a capital gains tax account with HMRC to advise them you need to also complete a capital gains tax return.

To be clear, you need to both submit the capital gains tax return and pay any capital gains tax due by the 60 day deadline.

The majority of people who will submit the capital gains tax return are those who sell property. You generally won’t need to pay capital gains tax return if you’re selling your main home unless you use part of it as business premises or lease part of it out; it will be due if you’re selling a second home, or buy-to-let property.

Cash flow advantage of selling property close to the end of the tax year

However, there is one exception to the 60 day capital gains tax reporting rule which could give you a big cash flow advantage.

Cash flow advantage

If you sell your asset close to the tax year end, say February or March, you are then allowed to include your capital gains tax information on your standard self assessment tax return.

What this means is that you bypass the 60 day rule for paying capital gains tax and the normal rules apply for self assessment, namely you have till the 31 January the following year to pay.

To enjoy this cash flow advantage, you will need to complete your self assessment tax return by 20 April after the tax year, which is very early filing for a self assessment tax return, but does mean you have the advantage of twice as much time to pay any capital gains tax due.