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Residential Property Owners – are you caught by the new CGT rules?

Posted by Simon Wake on 2nd April 2020

As a result of a recent change in the rules, anyone[1] selling residential property (other than their principal private residence) in the UK will, from 6 April 2020, have to:

  1. Report any gain made as a result of the sale; and
  2. Pay any Capital Gains Tax (CGT) due

within 30 days after the disposal.

This is a marked change from the current position whereby an individual is only required to declare the disposal on their self-assessment tax form and pay the CGT within the self-assessment tax deadline.

Those who fail to pay any applicable CGT within the 30-day limit will incur a penalty, as well as having to pay interest on top of the CGT figure already owing.

The current CGT bands for residential property are 18% for those in the basic tax bands, and 28% for higher rate taxpayers.

What residential property does the CGT change apply to?
  1. Holiday homes
  2. Residential lettings
  3. Inherited residential property
  4. Any other residential property you own that isn’t your main residence.
Do I always have to report the sale of residential property within 30 days?

No. The most important exception is that if the property is your main domestic residence an exemption applies called the ‘principal private residence relief’. If the property is your main domestic residence then no CGT is incurred, even if you make a profit.

In addition, in the following circumstances the 30-day rule is disapplied:

  • If the sale contract was made before the 6th April 2020
  • The disposal was made between a husband and wife or civil partners.
  • The capital gains made are within your annual CGT allowance. For individuals, the annual CGT allowance is set to increase to £12,300 per person on 6 April 2020.
  • The property was sold at a loss – (no capital gains were made).
How do I pay the tax within 30 days?

HMRC are creating a brand new online service through which individuals will be able to swiftly report and pay the CGT they owe. Few details have been released about the online system but it is anticipated to be similar to current tax payment portals in use by HMRC.

The government, at the time of the 2020 Spring Budget indicated that further guidance would be issued once into the new tax year and the completion of the online portal. However, in light of current events that guidance is likely to be delayed. Those contemplating disposing of residential property should remain aware of the imminent CGT change and seek professional advice if unsure, especially as the ongoing COVID pandemic looks certain to affect the practicalities of implementing the new regime.

[1] who is a UK resident, including trustees of UK residential property and professionals acting as agents.

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