Owners of second homes or buy-to-let properties are being warned to brace themselves for a "seismic shift" in how Capital Gains Tax (CGT) is paid.

From 06 April 2020 new rules are set to come into force for those who exceed the CGT threshold by selling residential properties.

The rules do not apply to the sales of main residences, which are usually covered by private residence relief.

However, a new online CGT return must be submitted for gains that are liable to the tax from an additional residential property sale.

Furthermore, any CGT owed from the transaction must be paid within 30 days of the sale being finalised.

Under current rules, taxpayers have until the self-assessment deadline after the tax year in which the sale was completed to complete a return and pay any tax.

Therefore, depending on the timing of the sale or disposal, CGT could be due any time between 10 and 22 months after the deal was done.

However, once the new 30-day payment window is introduced in the spring, taxpayers will have considerably less time to report the gain and pay the tax.

John Bunker, Chair of the Chartered Institute of Taxation's (CIOT) Private Client UK Committee, said:

"This is a seismic change for property owners with taxable gains on their residential properties.

"For homeowners who have let their property or moved out for long periods before selling, the tax rules can be complex.

"New rules for letting relief and a reduction in the final qualifying exempt period of ownership from 18 months to nine months start in April 2020.

"Rather than thinking about an annual compliance process, property owners need to have their records up to date in advance of the sale so that the 30-day deadline can be met and penalty charges avoided."

The CIOT expects more details, possibly in the Spring Budget in March, before the changes come in.

We can help

We can ensure you comply with the new rules – give us a call today on 01483 205890.