From April 2020, new capital gains tax rules are set to take effect the owners of residential property, and the changes will impact most sales of additional properties in the UK.
Capital gains tax is paid on any profits made through the sale of a property that isn’t your main residence for example, if you are landlord, made property investments, or receive rental income.
The changes coming in will affect the time you have to pay your capital gains tax bill, the amount of tax relief you can claim if you previously lived in the property, and how letting relief will work.
1) Exemption for the final period of ownership REDUCED to nine months
From April 2020, if you no longer live in a property that was once your main residence for longer than nine months you might be expected to pay CGT on the profits you make when you sell.
2) New residential CGT RETURN where tax liability arises
At present, you are exempt from paying tax on the final 18 months that you owned the property, regardless of whether or not it is rented out. This gives you longer to sell the property after moving out before you become eligible to pay capital gains tax.
From April 2020, not only will this period be reduced to nine months but you will be require to make this return whether you lived in the property or not.
3) ACCELERATED tax payment date to 30 days from date of completion
Currently, a property sale that incurs CGT in the 2019/2020 tax year does not need to be declared and paid until 31/01/2021.
From April 2020, sellers will need to pay the full amount owed within 30 days of the completion.
4) Letting exemption effectively REMOVED
The government has announced the removal of letting relief which is a valuable relief that currently provides up to £40,000 of exemption (£80,000 for a couple) to people who let a property that had previously been their main residence.
From April 2020, lettings relief could potentially only apply where the owner is sharing occupancy of the home with the tenant(s) under the same roof.
Godfrey Laws & Co Limited, together with HRJ Foreman Laws Solicitors and Barclays Bank PLC are holding a free seminar to discuss these changes and what you need to do.