There have been some important changes to Capital Gains Tax (CGT). It used to be that if you owed CGT from the sale of a property, you had until the next self assessment deadline (31 January) to report the disposal and pay the tax. For instance, if you sold a property on the 7th April 2019 this would fall in the 2019/20 tax year. Therefore CGT wouldn’t need to be declared and paid until 31 January 2021.

Changes to CGT

However, this has changed. From 6 April 2020, within 30 days of completion, yes, you read that correctly – within 30 days of completion, UK residents must now:

  • Calculate the gain made on the property (using estimates if necessary). The rates are 18% for gains within the basic rate tax band or 28% within the higher rate tax band.
  • Report the gain to HM Revenue and Customs by submitting a residential property return
  • Make a payment of CGT to HMRC

All within 30 days of completion!!

These new rules not only affect individuals, but also Trustees who hold and dispose of residential property. This change predominantly relates to the sale of rental properties. In most cases, you won’t need to pay CGT when selling the property you live in, because you will be entitled to ‘private residence relief’.

It is important to note that the capital gain will still need to be included on your Self-Assessment tax return. The payment that you made when submitting the residential property return will be credited against your tax liabilities when you submit your Self Assessment tax return.

The 30 day turnaround will undoubtedly cause difficulties for tax payers. It may lead to increase related professional accountancy fees and have an impact on the number of landlords willing to invest in buy-to-let properties.

There have also been changes regarding lettings relief and final period relief that may apply as well.

Each situation is different. If you have any questions or concerns about the changes please give us a call or drop us an e-mail.