29th
May 2023
UK PRS landlords are being warned by a tax expert that they must file their capital gains tax returns within 60 days of selling a property or face having to pay significant tax fines.
Many landlords are being forced out of the sector due to sky high mortgage cost increases, EPC requirements and of course the incoming anti-landlord Renters Reform Bill.
Rick Schofield, a tax partner at one of the most prominent accountancy firms, says: “We have witnessed numerous cases of landlords cashing out as they struggle to meet rising mortgage costs, with rental income insufficient to cover these hikes.”
Schofield states that the Bank of England’s sequential rate increases has now reached a level not seen for 15 years.
Commenting on the current economic climate, he added “The Bank Rate was last this high, at 4.5%, in October 2008 amidst the global financial crash. This spells the end of an era of cheap debt, which saw rates plummet to an all-time low of 0.1% during the pandemic.”
Schofield believes that many less experienced landlords may be in danger of overlooking their responsibility of having to submit CGT returns on selling a property, he says: “Some landlords, upon exiting the market, may not be aware of the necessity to personally file a capital gains tax return to HMRC upon disposing of a rented property. This requirement and process is not widely understood among landlords.”
Non compliancy fines range from £100 for failing to submit forms within the required 60 day period to £300 or 5 per cent of the capital gains tax if remain unresolved for three months after the 60 day deadline.
Schofield warned “If landlords have numerous disposals totalling £3 million and fail to submit the form in time, HMRC could collect up to £150,000.
“Whilst many landlords are thriving, others, including accidental landlords or those overly leveraged, are selling up to avoid financial hardship due to the interest rate climate and rampant inflation. However, some are selling not out of necessity, but as a means to fund retirement. With around 2.74 million landlords in the UK, the significance of understanding why the 60-day deadline matters and its distinction from annual self-assessment tax returns cannot be overstated.”
News Archive »