Sometimes, when you sell or transfer an asset, the proceeds are not received all at once. Instead, they might be paid in instalments spread over several years. To avoid a cashflow crunch, UK tax law provides two different provisions – s.280 and s.281 TCGA 1992 – which allow CGT to be paid in instalments.
CGT Instalments – s.280 TCGA 1992
This rule applies where the sale proceeds are receivable in instalments over more than 18 months, with the payments ending after the normal CGT due date.
Key points:
- Not automatic – the taxpayer must apply in writing to HMRC.
- Without an application, the full CGT is due by 31 January following the year of disposal.
- Instalments are normally 50% of each consideration instalment until the liability is cleared.
- Maximum period = the shorter of:
- the actual payment period, or
- 8 years from the normal due date.
- If instalments fall due before the normal CGT date, that proportion of CGT must still be paid by the normal deadline.
- If consideration after that date → CGT due as proceeds fall due.
- HMRC ensures intervals are never shorter than 6 months.
- Instalments under s.280 are interest-free.
Illustration 1 – CGT Instalments (s.280)
Amir sells an asset on 15 July 2025 for £180,000, payable in 9 annual instalments of £20,000.
- Chargeable gain → CGT due = £36,000 (2025/26 rates).
- Normal CGT due date = 31 Jan 2027.
- Amir applies to use the s.280 instalment option.
Instalment breakdown (50% of each):
- 1 Sept 2025: £10,000
- 1 Sept 2026: £10,000
- 1 Sept 2027: £10,000
- 1 Sept 2028: £6,000 (balance)
- Total = £36,000
When payable:
- First two instalments (total £20,000) fall before 31 Jan 2027 → due by 31 Jan 2027.
- 3rd instalment: £10,000 due 1 Sept 2027.
- Final instalment: £6,000 due 1 Sept 2028.
CGT fully paid within 3 years of first consideration instalment.
Illustration 2 – When s.280 Does Not Apply
Nathan sells an asset on 10 March 2026 for £300,000, realising a gain of £100,000.
- CGT liability = £20,000.
- Proceeds payable in 5 annual instalments of £60,000 (2026–2030).
Key points:
- £20,000 CGT < 50% of first instalment (£60,000).
- The first instalment (10 March 2026) is before the normal CGT due date (31 Jan 2027).
- Therefore, no s.280 option is available.
Full CGT of £20,000 due by 31 Jan 2027.
CGT Instalments – s.281 TCGA 1992
Section 281 applies where an individual gifts an asset and gift relief is unavailable. In this case, the donor can elect to pay CGT in up to 10 equal annual instalments.
Key points:
- Applies mainly to gifts of non-business assets, such as:
- Land and buildings not used in trade.
- Shares in unquoted companies.
- Shares in quoted companies where the donor controls more than 50% of voting rights.
- Not available if consideration is received for the gift.
- Unlike s.280, instalments under s.281 are interest-bearing, with interest charged on the unpaid balance.
Illustration 3 – CGT Instalments (s.281)
In June 2025, Helen gifts her son David a commercial property (non-business asset).
- Cost: £85,000
- Market value: £210,000
- Gain: £125,000
- CGT at 20% = (£125,000 − £3,000 annual exemption) × 20% = £24,400 (due 31 Jan 2027).
Since gift relief is unavailable, Helen elects to pay in 10 annual instalments:
- First instalment (31 Jan 2027): £2,440.
- Second instalment (31 Jan 2028): £2,440 + interest on the unpaid balance (£21,960 × 7.75% = £1,700 approx.) = £4,140.
Payments continue annually until the liability is cleared. If David sells the property, all remaining tax and interest become immediately payable.
Key Takeaways
- s.280 allows CGT on deferred sales proceeds to be spread, but only interest-free and only if strict conditions are met.
- s.281 applies to certain gifts where no relief is available, but instalments carry interest.
- Planning ahead is essential to avoid large upfront CGT bills when proceeds (or no proceeds, in the case of gifts) are delayed.
