Changes to Capital Gains Tax
Starting from the 6th of April 2020, there are new rules governing Capital Gains Tax on property for UK residents. The significant rule change is in the way in which the gain is reported to HMRC. Previously, any taxable gains were simply reported via your Self-Assessment Tax Return and paid along with any other taxes due by the 31st of January that followed the end of the relevant tax year. However, under the new rules any capital gain resulting in a taxable gain will need to be reported to HMRC and paid within 30 days.
What does this mean?
For any UK residents selling their residential property on or after the 6th of April 2020, a UK Land Return will need to be filed online with HMRC if a taxable gain arises from the sale. This can be done via a Government Gateway account and must be done within 30 days of the date of disposal to avoid a late filing penalty.
If a taxable gain arises, then payment must also be made within 30 days to avoid any interest being added on. The payment due will be an estimate of the capital gains tax, and the taxable gain will be reported again via the Self-Assessment Tax Return for the relevant year to account for any differences in tax bands that may arise when calculating other income.
If any differences arise between the amount paid within the 30 days following disposal, and the amount falling due from the taxable gain on 31st of January reported via Self-Assessment, interest will either be charged or repaid by HMRC as necessary.
There are of course some exemptions to the new rules. If the property you are selling is your main residence then you will not need to make any filings to HMRC, as any gain would fall under principal private residence relief.
Likewise, if your gain is below the annual exemption amount or if you make a loss (this includes from losses brought forward on other disposals), then no report would need to be filed.
What else has changed?
There are a couple of other small changes made to Capital Gains on property that may have flown under your radar:
- Lettings relief has been abolished from the 6th of April 2020. Any properties disposed of after this date will not be able to claim lettings relief when calculating their taxable gain.
- Private residence relief has also seen a change. The relief will now only be available for 9 months of occupation instead of 18 months for properties disposed of on or after the 6th of April 2020.
Due to the current situation, HMRC has delayed the necessary filing of UK Land Returns for all taxable gains on UK property transactions occurring between the 6th of April 2020 and the 30th of June 2020 until the 31st of July 2020. Any taxable gains on UK property during this period should be reported by the 31st of July 2020 to avoid any late filing penalties.
If you have sold or are intending to sell a property during the current tax year and would like some help or advice regarding the new rules, please don’t hesitate to get in touch with us to discuss how we can help.