Capital gains tax changes introduced this month mean that landlords and second home owners may pay tax earlier than they anticipate.
The changes introduced on 6th April 2020 bring forward the payment of capital gains tax on residential property to 30 days from the completion date.
The sale will continue to be disclosed on self-assessment tax returns but there are additional reporting requirements.
What are the new rules?
The disposal of UK residential properties after 6 April 2020 that generate a capital gains tax liability must be reported to HMRC within 30 days of the completion date and the tax must be paid within that time frame.
HMRC is setting up a new online service ‘CGT on UK Property’ through which the disposal can be reported and the tax paid.
Who do the new rules apply to?
The new rules apply to individuals, trustees, personal representatives and partners of partnerships, including limited liability partners who are UK residents.
Non-UK residents have been required to report gains since 6 April 2019 will be required to report under the new system.
Properties that are sold under contract before 6 April 2020 do not have to be reported even if the sale was completed after 5 April 2020. They should be reported on the 2019/20 tax return in the usual way.
Capital gains that fall within an annual exemption do not have to be reported.
Losses should be reported if they are to be used against a sale in the same year and will reduce the tax liability.
If a property is held by more than one person each of them will have to make a report. The report is per individual and not per property.
What should I do?
If you are selling a property that falls within the new regime please let us know before contracts are exchanged. This will allow time for all of the necessary information to be collated before the sale takes place.
Register for a government gateway account if you don’t already have one.