From 6 April next year, Capital Gains Tax (CGT) incurred following the disposal of a residential property will have to be paid within 30 days of the completion date. Failure to pay on time will result in HMRC imposing interest and potential penalties. This new deadline applies even where no money has changed hands, such as when a property is transferred into trust or gifted to a family member.

Today, a taxpayer reports any capital gains on their self-assessment tax return, with the resulting tax being payable by 31 January following the year in which the gain was made.

So, for example, whilst a main residence is usually CGT-exempt, if a second property had been sold on 1 May 2018, this would be reportable on a 2018/19 tax return with the tax being payable by 31 January 2020. This gives someone a period of 20 months longer to pay the tax than they will have under the new rules.

HM Revenue & Customs are taking steps to ensure that taxpayers are made aware of these changes, having conducted recent research indicating that their customers have very differing levels of awareness and experience when it comes to CGT.

At greatest risk are customers dealing with a ‘one-off’ property transaction who may have had little, or no, previous CGT experience. “Multiple disposal’ customers, on the other hand, are more likely to have greater knowledge and experience and/or to use an agent who can communicate any relevant rule changes to them.

Other proposed changes are due to be implemented from April 2020 but are still under consultation (with the results due later in the summer). These are potentially significant and could affect decisions about selling properties or making them available to let.

Changes to Private Residence Relief (PRR)

From April 2020, this relief will apply to the full period a taxpayer lived in the property as their principal residence plus the final 9 months of occupancy (unless they can claim special circumstances, such as a disability or having to move into care). This is down from 18 months (and 36 in 2014).

Changes to Letting Relief

This is currently the lower of:

  • The amount of gain attributable to the letting proportion of the property;
  • The amount of PRR that can be claimed;
  • £40,000.

From April 2020, this relief will only be available to people who were sharing occupancy of a property, as their main home, with a tenant throughout the period of letting. This will affect most people who rent out a property that they’ve previously lived in, as it will make more of the capital gain on their property assessable to CGT.

If you have any questions about these changes to Capital Gains Tax call Vincent & Co on 01803 500500 and we will be delighted to help you.