JUST SOLD A HOUSE?
Another tricky area in which people could easily get caught out is in relation to any Capital Gains Tax bill due from the sale of an investment or second property. The reason for this is that any CGT due must typically be paid in the year the property is sold — though it is usually the following year that any profits made from that sale are declared in a tax return.
So should you have sold a property in 2016 and be liable for CGT on any profits made from the sale, in most cases you should have already paid your CGT bill last year — even though you’re only declaring the profits made from the 2016 sale when filing your tax return this year.
Similarly, should you have sold a property in 2017 and face a CGT bill as a result, you don’t have to declare the profits from the sale until you are filing your tax return in 2018 — though you must usually settle your CGT bill in 2017.
“If the sale of a house (such as an investment property) in 2017 gives rise to CGT, the CGT must usually be paid in 2017,” said O’neill.
“If the contract for sale is signed between January 1, 2017 and November 30, 2017, the CGT must be paid before December 15, 2017. The CGT on sales arising in December 2017 will have to be paid by January 15, 2018.
The actual details of the 2017 sale do not get reported until 2018 in the 2017 tax return, which is to be filed by October 2018.
“There is a key difference between the date the contract is signed and the date the sale closes — the earlier date dictates when the CGT must be paid.”