Changes to capital gains tax

CHANGES TO CAPITAL GAINS TAX ON SALE OF RESIDENTIAL PROPERTIES

There are three major changes to the way that Individuals are taxed on capital gains arising on the disposal of ‘buy to let’ & ‘second home’ residential properties, coming into effect from the 6^th April this year.

1. DATE OF PAYMENT

From the 6^th April 2020 you will need to submit to HMRC (within 30 days of the completion of the sale of a property) a provisional Capital Gains Tax calculation and pay the tax shown as due. The gain is also then declared on the annual tax, with credit given for the provisional payment already made.

For disposals completed by the 5^th April 2020 the date for payment of the CGT would not be until the 31^st January 2021. So, in certain circumstances clients may want to, if practically possible, to bring disposals forward before this coming 5^th April.

2. LETTINGS RELIEF

For properties sold before the 5^th April 2020 there is a possible deduction of up to £40,000 from the Capital Gain if at any time a rented property had been your main residence, whether or not you had lived in the property at the same time the property was let.

From 6^th April 2020 the relief will only be available where the letting of the property occurred at the same time as the property was your main residence.

3. PRINCIPAL PRIVATE RESIDENCE RELIEF (PPRR) – Final period of ownership

Currently the last 18 months of ownership is treated as qualifying for PPRR. From the 6^th April 2020 this period is reduced to the last 9 months.