The consumer protection magazine Which? is warning landlords and second-home owners they could be required to pay capital gains tax within 30 days of selling their properties, under new rules being proposed by the Government.

Currently sellers of second homes or investment properties can postpone paying capital gains tax (CGT) until they file their tax return for that tax year, which could be more than 18 months after the property is sold. But draft legislation will mean property investors have just 30 days to pay up. CGT is payable when people sell a valuable asset like a second home or a buy to let property for a profit. People can earn £11,700 (or £23,400 for couples who pool their allowances) before paying tax. Above this, basic-rate taxpayers have to pay 18 per cent of any gain on property, and higher rate taxpayers pay 28 per cent.

Under the current rules, landlords must pay CGT for property sales by 31 January after the end of the tax year, at the same time as their self-assessment tax returns are due (for online filings). So, if they sold an investment property in July 2018, it would be taxed within the 2018-19 tax year, and the landlord could wait until 31 January 2020 to pay the bill. But under the new rules, people will need to pay up within 30 days of the sale going through. For some landlords, this could move up their payment date by more than a year and a half and cause problems with their cash flow. This follows a number of other tax reforms that have pushed up bills for landlords, including the scaling back of mortgage interest relief, and the introduction of a stamp duty surcharge on buy-to-let and second homes.

The new rules have not yet been confirmed, as the draft legislation is currently passing through Parliament. The change was originally due to come into effect in April 2019, but the proposals have been delayed and are likely to take effect for property disposals on or after 6 April 2020.

By Patrick Mooney, editor