Capital Gains Tax can be paid in instalments in two situations. Under section 280 of the Taxation of Chargeable Gains Act 1992 the seller can ask to spread the tax where the price itself is payable in instalments over more than 18 months, and under section 281 a donor can elect to pay the tax on certain gifts in 10 equal yearly instalments where holdover relief is not fully available. Neither is automatic: both need a written request to HMRC, and only section 281 instalments carry interest.

Why would Capital Gains Tax need paying in instalments?

The normal rule taxes the whole gain in the year of disposal, even if the buyer pays over several years or, in the case of a gift, pays nothing at all. Where deferred payments are of a known or calculable amount, CG14881 says the full amount is included in the disposal proceeds at the outset. The seller can therefore owe tax on money they have not yet received. HMRC’s Capital Gains Manual at CG18601 lists the statutory exceptions to the normal payment rule, and the two instalment provisions are the main ones for individuals.

They are separate from a time to pay arrangement, which is a negotiated concession for people who cannot pay. Instalments under sections 280 and 281 are a statutory right if the conditions are met, and HMRC’s Self Assessment Manual at SAM80072 calls them statutory instalment arrangements.

When does section 280 apply to a sale?

Section 280 applies where the consideration, or part of it, taken into account in computing the gain is payable by instalments over a period that begins no earlier than the disposal and exceeds 18 months. CG14910 adds that the instalments must continue beyond the date on which the tax would otherwise be due. If those tests are met, the tax may be paid “by such instalments as the Board may allow” over a period of no more than eight years, ending no later than the last instalment of price.

The relief only works where the price really is paid in instalments. HMRC gives these limits:

  • If the seller receives debentures or loan notes that are redeemed in stages, the full consideration has been received and instalments are not appropriate (CG14910).
  • If the seller is paid in full and lends the money back to the buyer, there are two transactions and the full price has been received, following Coren v Keighley (CG15020).
  • Instalments are not available where market value is substituted for the price (CG15020), or where the deferred amount is an unascertainable earn out, because the seller has received a right rather than instalments (CG14940).

The distinction between fixed deferred consideration and an earn out is explained in earn outs and deferred consideration.

How are section 280 instalments worked out?

CG14910 sets HMRC’s normal approach. Each instalment of tax is 50% of each instalment of price, applied to the gross instalment without deducting selling costs, until the whole liability is paid. Tax linked to price instalments falling due on or before the normal due date (31 January after the tax year for an individual) is payable on that date. Tax linked to later price instalments is payable on the date the seller is contractually entitled to that instalment. Where price instalments are less than six months apart, HMRC seeks to agree tax instalments at intervals of at least six months.

The arrangement must end by the earlier of the date of the last price instalment and eight years after the normal due date. SAM80072 says up to eight yearly or 16 half yearly instalments can be accepted. Importantly, the statutory due date of each section 280 instalment becomes its relevant due date, so no late payment interest arises if each instalment is paid on time.

When can the tax on a gift be paid over 10 years?

Section 281 lets the person paying the tax elect, by notice to HMRC, to pay it in 10 equal yearly instalments. It applies where the whole or part of a qualifying asset is disposed of by way of gift, or is deemed disposed of by trustees under section 71(1) or 72(1), and either no holdover relief is available under section 165 or section 260, or the held over gain is less than the full gain. The qualifying assets are:

  • real property, or an estate or interest in it;
  • shares or securities that gave the donor control of the company immediately before the disposal; and
  • other shares or securities not listed on a recognised stock exchange.

CG66452 confirms that shares traded on the Alternative Investment Market fall outside the third category. Section 281(8) extends the election to a gain arising when holdover relief is clawed back because a settlement becomes settlor interested, provided none of the gifted property has since been sold. CG66452 says the election should be made before the tax becomes payable. Whether holdover relief could apply first is covered in gift holdover relief and gifts and market value.

How do interest and early payment work under section 281?

The first instalment is due on the date the tax would have been due without the election. Unlike section 280, interest is charged: section 281(5) applies the normal interest rules as if no election had been made, and the interest on the unpaid balance is added to each instalment. SAM80072 explains that the original relevant due date is kept for every instalment, so interest on each runs from the normal due date.

The outstanding tax, with interest to date, can be paid off at any time. It becomes payable immediately if the gift was to a connected person, or was a trustee deemed disposal, and the asset is later disposed of for valuable consideration, whether by the recipient or anyone else (section 281(7)). The relief is intended for donors who keep the asset in the family, not for gifts that are sold on.

How do you apply, including on a 60 day property return?

Both reliefs need a written request. Under the action guide at SAM80075, HMRC passes the request to the office with technical responsibility, which confirms whether the provisions apply, the tax involved and the first due date. HMRC then writes to confirm the terms, and later instalments are requested through Self Assessment statements.

For a residential property disposal reported on the Capital Gains Tax on UK property account, appendix 18 of the Capital Gains Manual (CG APP18 260, sections 2.6.7 and 2.6.8) says the election should be uploaded with the online return. The return is not reviewed manually, so you must also contact HMRC to ask for the instalment request to be reviewed. A paper return can have a letter attached. Normal payment rules apply until HMRC accepts the election, and for a gift the first section 281 instalment is due when the full amount would have been due: 60 days after completion. The return itself is explained in the 60 day property return guide.

How does section 280 work on a typical sale?

Illustration only. Priya, a UK resident, sells a commercial unit on 1 August 2026 for £400,000: £40,000 on completion and four payments of £90,000 on 1 August 2028, 2029, 2030 and 2031. Her Capital Gains Tax for 2026 to 2027 is £80,000, normally due on 31 January 2028, when she will have received only £40,000.

Price instalment 50% of price Tax due Due date
£40,000 on 1 August 2026 £20,000 £20,000 31 January 2028
£90,000 on 1 August 2028 £45,000 £45,000 1 August 2028
£90,000 on 1 August 2029 £45,000 £15,000 (balance) 1 August 2029

The price runs over five years, well beyond 18 months, and the tax ends before both the last price instalment and the eight year limit. Paid on time, these instalments carry no interest.

How does section 281 compare on a gift?

Illustration only. Graham gives his daughter a let house in 2026 to 2027. No holdover relief is available on the gift. The tax is £20,000, due 60 days after the transfer completes. If he elects under section 281, he pays £2,000 a year for 10 years, plus interest on the unpaid balance from the original due date. If his daughter sells the house in year four, the remaining £14,000 and accrued interest become payable at once.

What mistakes come up most often?

  • Assuming instalments are automatic because the contract spreads the price, without making a written request.
  • Asking for section 280 on loan notes, a loan back to the buyer or an unascertainable earn out.
  • Claiming section 281 for AIM shares or for assets outside the three categories.
  • Forgetting that section 281 instalments carry interest from the normal due date, so delaying payment has a cost.
  • Uploading an election with an online property return and not contacting HMRC, so the full amount is treated as due.

Once a property return has been filed, changing it is covered in amending a 60 day CGT return.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.