Over recent years there have been several changes to the Capital Gains Tax (CGT) systems.
In April 2020, more changes are set to impact CGT on property disposals. The aim of these changes is to collect more tax and do it faster.
Changes will dramatically impact the tax you pay on residential property sales as a UK resident. Read on for details of the changes.
30-day Window
At present, personal tax payers pay CGT between 10 and 22 months after the date of the sale and report any capital gains on their self-assessment tax return. This tax is currently payable by 31 January following the year in which the gain was made.
On 6th April 2020, the payment of CGT on the sale of residential property will be brought forward to a 30-day window after the date of disposal.
The change could have dramatic impact on payments made to the government. It will become a standalone report and payment for non-self assessment tax payers.
No returns will be required for no gain/no loss disposals and for disposals where no tax is due. The normal 12 month period for amending the return also remains. As always, failure to pay on time will result in HMRC imposing interest and potential penalties.
Other proposed changes are due to be implemented from April 2020. These are potentially significant and could affect decisions about selling properties or making them available to let.
Changes to Private Residence Relief
Earlier this year the government amended the period of deemed only or main residence relief applying to property that was previously the taxpayer's main place of residence. After March 2020, the deemed period will be reduced from the final 18 months of ownership to 9.
Changes to Lettings Relief
Changes are also proposed to letting relief. This is a potentially very useful relief to property owners. As it's available to the owner of the property rather than to the property itself, CGT on a property could be reduced further if there are multiple owners. Each individual would receive up to £40,000 letting relief. So for partners or spouses this would mean relief of up to £80,000.
Before 5th April 2020, lettings relief is available to an individual in respect of a dwelling house that has at some point been used as their only or main residence and the whole or any part of the property, has at any time in their period of ownership been wholly to partly let - thus including any lease, tenancy or license. Relief would apply if the owner was not living in it at the same time.
From 6th April 2020, proposed changes mean that lettings relief applies only in circumstances if the property owner is in shared-occupancy with a Tennant. For example, if the lodger occupies a room with shared access to other areas rather than the entire property being let.
This could have a huge impact on the tax payable on any property which has previously been your main residence and therefore it may be worthwhile considering a sale before the changes come into force.
Contact us if you would like to discuss preparations for the changes in more detail. Give us a call on 01423 431889 or email catherine@bctaccountants.co.uk.
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