Changes to Capital Gains Tax

6th Apr 2020

From 6th April 2020, if you’re a UK resident and sell a residential property in the UK you’ll have 30 days to tell HMRC and pay any Capital Gains Tax owed. Currently, you have between nine months and 18 months to pay. The relevant date for the 30-day payment window runs from the date of completion rather than the date of exchange.

These new rules will apply to a legally binding contract for sale made on or after the 6^th April 2020. Therefore, these rules do not apply to any contracts which have exchanged unconditionally, on or before the 5^th April 2020.

A disposal of a property will be liable to Capital Gains Tax if the property is sold, gifted or transferred to someone else, other than your spouse.

Some examples of where a return will not be required are:

• Where the gain is covered by principal private residence relief throughout the duration of the taxpayer’s ownership
• If a loss arises on the sale of the property
• The gain is small enough to be covered by the individual’s annual exemption for the year of disposal.

This change is most likely to affect buy-to-let landlords, owners of second homes, owners of holiday homes and owners of large properties / estates.

Where properties are held jointly or in partnership, each owner is required to submit a UK Land return and pay the tax in respect of their share of the disposal. Penalties will apply if the return is filed late.

This change will significantly reduce the amount of time you have to calculate and report your CGT bill, but note that it only applies to UK residential property sold on or after 6 April 2020.

It is not straight forward to calculate your liability; the information needed will include (but not be limited to):

1. the original cost of the property;
2. improvement costs;
3. legal fees
4. any tax reliefs or claims that can be made;
5. your tax rate based on estimated income and gains.

It is possible to get an idea of your Capital Gains Tax liability using the government calculator:

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

If a return is filed more than 30 days following the completion of the sale, it is late and attracts a late filing penalty of £100. Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.

Please note that this article is not intended as tax advice and you are strongly advised to get independent tax advice in respect of your tax liabilities.