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Deadline extension for Capital Gains Tax (CGT)

Despite previous talk of Capital Gains Tax reform, the only change confirmed by Chancellor Rishi Sunak’s Autumn Budget 2021 speech is an extension of reporting and payment deadlines.

From 27th October 2021, if you sell a property in the UK, then you’ll have 60 days from the date of completion to report your gains and pay the tax. The deadline was previously 30 days, which is a tight turnaround for most taxpayers (and unfortunately still applies to sales before the change).

This also applies for non-UK residents selling property within the UK, who were finding it particularly difficult to set up a Government Gateway account in time to report and pay their Capital Gains Tax. Non-UK residents must report and pay CGT for both residential and commercial property sales.

Are CGT rates increasing in 2022 – 2023?

No: at the moment, this administrative modification is the only change to Capital Gains Tax until April 2023. The CGT allowance (tax-free maximum, called the Capital Gains Tax Annual Exempt Amount) is due to remain at £12,300 until 2025-2026, continuing to stay at the 2020-2021 level.

The CGT rates will also remain the same, at 28% for residential property gains and 20% for other chargeable assets if you’re a higher rate taxpayer. For basic rate taxpayers, the amount of CGT you have to pay over the allowance depends on your taxable income and the size of the gains.

The income tax rates are also set to stay the same until 2025-2026, with the Personal Allowance for tax-free earnings fixed at £12,570. There is no tax-free allowance if you earn more than £125,140 a year. The basic rate limit (20%) will be £37,700 for this time, while the higher rate (40%) and the Upper Earnings Limit for National Insurance Contributions will stay at £50,270.

How do I know if I owe Capital Gains Tax?

One of the ongoing issues with CGT is that many taxpayers are simply unaware of the tax reporting requirements when selling certain types of property or assets. Accountants may not be informed of a property disposal until it’s time to submit a tax return, which could be almost 2 years later.

Even those who submit self-assessment tax returns may miscalculate and end up paying the wrong amount. In theory, the tax calculation should factor in a refund for overpayment of Capital Gains Tax, but this doesn’t always happen – leaving frustrated taxpayers trying to phone up HMRC.

If you believe that you have been or will be affected by this change to CGT, or if you’re still unclear on what counts as capital gains, you might benefit from getting in touch with the team of experts at GBAC. We can provide tax consultancy services
and help you to resolve your HMRC enquiries.