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Changes to Capital Gains Tax on Sales of Residential Property

19/11/2019

Following the success of changes made to Capital Gains Tax (CGT) and residential property sales in 2015 – further changes are set to be introduced from the 6th of April 2020, for UK residents who own residential property in the UK or abroad.

The CGT changes from and including the tax year 2020/21 will mean that any CGT liability on the sale of residential property will become payable to the HMRC for up to 21 months earlier than under the current rules.

The changes for UK residents’ sales after the 5th April 2020 (as based on the sale contract date and not the completion date) of residential property are as follows:

1. If you sell a residential property in the current tax year to the 5th of April 2020, you are required to declare to HMRC the CGT on your 2019/20 Tax Return and pay any 2019/20 CGT liability by 31 January 2021. As from the 6th of April 2020, if you sell residential property, then you will be required to declare and pay any CGT liability to HMRC within 30 days of the date of completion of the sale of the residential property.This new CGT declaration/payment rules for sales of residential property will apply whether or not the seller is already registered for Self-Assessment (SA), but HMRC have said that if you have only have the CGT on the sale of a residential property to declare then you will not have to register for SA. However, if after the end of the relevant tax year you have to make changes to your ‘provisional’ CGT computation then you must declare those changes to HMRC.
    
2. (As will be appreciated to comply with the new CGT rules as from the 6th of April 2020, including the 30 days filing period, it will be necessary to estimate certain information e.g. your other taxable income to establish what if any of the CGT should be charged at the 18% rate and the remainder at 28%.In view of this, the CGT computation can only be provisional, and so the final CGT computation will need to be completed after the end of the tax year in which the sale of residential was contracted. The final CGT computation will then have to be filed to HMRC either under the SA process or for those taxpayers who are not registered for SA- as mentioned above- a direct declaration to HMRC.
    
3. There will be HMRC penalties for errors and failing to meet the new 30 days declaration to HMRC deadline-the HMRC penalties are yet to be announced but if they are to be similar to those penalties currently charged to non-residents for failure to comply they will be expensive!

The above new CGT rules for the sale of residential property as from the 6th of April 2020 come along when there are also other changes to the CGT on sales of residential property.

Other CGT changes from the 6th of April 2020 include the calculation of any CGT chargeable capital gain on the sale of your main home called your principal private residence (PPR). The main change is that currently the last 18 months of ownership of your PPR is always treated as, in effect, CGT exempt but as from the 6th of April 2020 the above 18 months is reduced to the 9 months. This will mean perhaps even more reportable CGT within the new 30 days deadline period!

In view of the HMRC penalty regime, if you are proposing to sell a residential property wherever located, we strongly recommend that you take professional advice.

Professional CGT Advice

Here at HaesCooper, we have the tax expertise to guide you through the complex residential property CGT rules in order to ensure you are fully aware of what you can claim to reduce your CGT and then finalise your correct CGT liability. We will also ensure that you do not fall foul of the HMRC penalties regime for missing the statutory time limits for declaring your CGT to HMRC. With this professional support and advice, you will best place to plan your future residential property sale(s).