Can I Delay or Spread a Capital Gains Tax Payment?

Introduction

Capital Gains Tax (CGT) is the tax you pay on the profit when you sell, give away, or dispose of certain assets such as property, shares, or valuable items. The timing of when you must pay CGT depends on the type of asset and how the gain is reported.

Sometimes, people ask whether they can delay or spread a CGT payment to ease cash flow, especially if the sale proceeds are tied up or if they have multiple gains in one year. The short answer is that while you cannot normally spread the tax over several years, there are limited situations where payment can be deferred or delayed. This article explains when this might apply and how to manage your payment deadline effectively.

When You Normally Pay Capital Gains Tax

Most individuals pay CGT in one of two ways, depending on the asset sold:

1. Residential property (not your main home) You must report and pay any CGT within 60 days of completion using HMRC’s online property return system.

2. Other assets (such as shares or business assets) You report and pay CGT through your Self Assessment tax return by 31 January following the end of the tax year in which the gain arose.

For example, if you sold shares in June 2024, you would pay CGT by 31 January 2026, giving you several months to plan.

If you do not file or pay on time, HMRC can charge interest and penalties.

Can You Delay or Spread Capital Gains Tax?

In most cases, CGT is due in a single lump sum by the relevant payment deadline. HMRC does not usually allow individuals to spread payment over several years. However, there are specific circumstances where you can defer or delay payment legally.

1. Payment Plans for Financial Difficulty

If you cannot pay your CGT bill in full by the deadline, you can ask HMRC for a Time to Pay arrangement. This allows you to spread payments over several months, typically through monthly instalments.

To qualify, you must:

• Contact HMRC before or soon after the payment deadline.

• Explain your financial situation honestly.

• Agree on a realistic repayment plan.

Interest will still apply to the outstanding balance, but late payment penalties can often be avoided if you reach an agreement early.

2. Capital Gains Tax Deferral Reliefs

There are several reliefs that allow you to defer or delay paying CGT if you reinvest or roll over your gains into specific types of qualifying assets.

Business Asset Rollover Relief

If you sell a business asset (such as land, machinery, or buildings) and buy a new qualifying asset, you can defer paying CGT until you dispose of the new asset. The gain is effectively “rolled over” into the new purchase.

The new asset must usually be bought within three years of selling the old one.

Incorporation Relief

If you transfer your business into a limited company, you can delay paying CGT on the gains made from transferring your business assets. The gain is held over until you sell the company shares you received in exchange.

Enterprise Investment Scheme (EIS) Deferral Relief

If you reinvest a capital gain into shares in a qualifying EIS company, you can defer paying CGT until you sell those shares. There is no limit to the amount that can be deferred, as long as the investment meets EIS conditions.

Gift Hold-Over Relief

When you give away business assets or certain qualifying shares, you may be able to defer the gain. The person receiving the asset “inherits” the gain and will pay CGT when they eventually sell it.

3. Delaying Payment for Property Sales

For residential property gains, the 60-day payment rule is strict. However, if you have made an error or are unable to calculate your gain within that period, you can:

• File a temporary estimate and amend it later, or

• Contact HMRC if extenuating circumstances (such as illness or technical problems) prevent timely payment.

In rare cases, HMRC may allow short delays for reasonable causes, but penalties are usually applied if the delay is unjustified.

4. Offsetting Losses to Reduce CGT

While this is not a deferral, using capital losses from the same or previous tax years can reduce or eliminate your CGT bill. Losses must be reported to HMRC within four years of the end of the tax year in which they occurred.

By planning the timing of asset disposals carefully, you can reduce your overall taxable gains and manage your liability more effectively.

5. Timing the Sale to a New Tax Year

Another legitimate way to delay payment is through tax planning. If you are close to the end of a tax year, delaying a sale until after 6 April moves your gain into the next tax year.

This does not spread the tax across years, but it can give you an additional 12 months before the payment is due and allow you to use your next annual CGT exemption.

Example Scenario

Amira sells an investment property in February 2025 for a large gain. She has until 5 April 2025 before the tax year ends, but she realises that delaying completion until April would push the gain into the 2025 26 tax year.

By doing this, she gets until 31 January 2027 to report and pay the tax through Self Assessment, giving her extra time to plan. She also uses the new year’s CGT exemption to reduce her liability.

This strategy requires careful timing and should not be used to avoid tax unfairly, but it can provide breathing space for legitimate planning.

What Happens If You Pay Late

If you miss the payment deadline, HMRC will:

• Charge interest on the unpaid amount from the due date.

• Add penalties depending on how late the payment is.

The longer you delay, the higher the charges become. If you think you cannot pay on time, it is better to contact HMRC and agree on a payment plan rather than ignore the issue.

The Role of an Accountant

An accountant can help you manage CGT efficiently by:

• Calculating accurate gains and allowable costs.

• Identifying deferral or relief options that apply to your situation.

• Advising on timing to minimise tax.

• Setting up a Time to Pay arrangement with HMRC if needed.

They can also ensure you report all disposals correctly, avoiding unnecessary penalties.

Conclusion

While you cannot usually spread Capital Gains Tax payments over multiple years, there are legitimate ways to delay or defer them. Options such as reinvesting through EIS or rollover relief, claiming gift hold-over relief, or using a Time to Pay plan can help ease the financial burden.

Planning ahead and seeking advice from an accountant ensures you meet your obligations while taking advantage of any reliefs available. Acting early is always the best approach to managing Capital Gains Tax effectively and avoiding costly penalties.