REMINDER – CGT rules are changing in April 2020

by Mark Alexander - Founder of Property118

15:37 PM, 9th January 2020, About 5 years ago 9

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From 6 April 2020, a UK resident taxpayer will be required to make a return and payment of Capital Gains Tax within 30 days following the completion of a residential property disposal on a worldwide basis. This rules has applied to non-UK-Residents for a few years now.

The new requirements will not apply, however, where the gain on disposal is not chargeable to CGT, for example where the gains are covered by private residence relief or in connection with a business sale in exchange for shares where the entire capital gain is rolled over as per TCGA92/S162 ‘incorporation relief’.

These new reporting and payment requirements will mean that you will need to have all of the information available to make the return and pay your capital gains tax liability promptly once the property has sold. If you are thinking about selling a residential property then you can save yourself a lot of work or accountancy fees by using one of HMRC’s best kept secrets for calculating CGT, their online CGT calculation wizard – see below.

https://www.tax.service.gov.uk/calculate-your-capital-gains/resident/properties/

This piece of online software can be used anonymously too, so you can use it to crunch the numbers before you commit to selling. Accountants often charge hundreds of pounds to do these calculations for you. Now you can do them for yourself, and for free. YOU’RE WELCOME 😀

HMRC also have another version of this CGT calculation software for non-UK-residents – see below.

https://www.tax.service.gov.uk/calculate-your-capital-gains/non-resident/

Penalties and interest will be charged for not filing CGT returns on time and/or for not paying your tax by the due date.

Changes to Private Residence Relief and Lettings Relief – increased capital gains tax liabilities

Your capital gains tax liabilities may also increase as a result of two proposed changes to private residence relief that will also apply from 6 April 2020.

From 6 April 2020, the final period exemption will be reduced from 18 months to just 9 months and Lettings Relief (currently worth up to £40,000 per person per property) will be reformed so that it only applies in circumstances where the owner is in ‘shared occupancy’ with a tenant. These combined changes are likely to result in increased capital gains tax liabilities becoming payable because the reduction to the final period exemption will reduce the exempt part of the capital gain, thus increasing the proportion of the gain that is chargeable to Capital Gains Tax and the change to Lettings Relief will effectively abolish this relief entirely in most cases.

If you are thinking of disposing of a property which has not at all times been your only or main residence, but which you have lived in at some point during the period of ownership, you may wish to consider doing so before 6 April 2020 before the changes come in. For capital gains purposes, the date of exchange of contracts is taken as the date of disposal.

Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers).

Professional advice from a qualified Barrister-At-Law, insured up to £2,500,000 per claim.

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There will never be an optimal ‘one-size-fits-all’ business structure for tax purposes. The presentation below provides a useful overview of some of the other options you might like to discuss with us.

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Comments

RODNEY CRABB

8:55 AM, 10th January 2020, About 5 years ago

What happens if you move back in to a previous main resi. Do they still calculate cgt or do you pay zero. I know a few people havd done this. Have they closed this option down as well. Won't be worth selling if that is the case

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Richard Adams

21:40 PM, 10th January 2020, About 5 years ago

How does this new April 2020 CGT rule effect a situation where CGT applies on sale of a property while at same time, same tax year probably, capital losses apply to other sales? How can the losses offset the gain if immediate payment of CGT is required?

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Mervin SX

19:41 PM, 12th January 2020, About 5 years ago

Richard, You ask a very interesting question!

But I would imagine, the April 2020 CGT rule will be applied separately to properties and other assets, which will be a bit odd, but or else, capital losses of other assets (e.g. shares) within the same tax year, could be easily used as a loophole to avoid CGT liability on properties.

Any thoughts of comments from anyone more informed on this subject matter?

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Richard Adams

22:15 PM, 12th January 2020, About 5 years ago

Reply to the comment left by Mervin SX at 12/01/2020 - 19:41
Glad it is not just me uncertain. Exactly this scenario will be facing me within 18 months or so. Wise informed advice will be welcome!

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Binks

11:36 AM, 13th January 2020, About 5 years ago

I'm also interested in how the level of CGT is determined - 18% or 28%? I.e. if one sells at the beginning of a tax year and they are not sure whether they will fall into basic or higher tax band in the rest of the year. Or is the payment within 30 days automatically charged at 18% and any potential additional payment accounted for in the following tax return? Given this is coming into force in three months, I can't find any clear guidance anywhere.

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MarkT

13:11 PM, 24th February 2020, About 5 years ago

I have a similar question as I am currently in the process of selling a number of buy to let properties. I expect the first to sell will generate a sufficient amount to mean that even with my allowance that CGT is due when the new 30 day rule applies . The second will almost certainly create a loss - Add both together and no CGT will be due for the year . So am I likely to be in a position where I have to pay CGT within 30 days on the first prop but not be able to claim this back until I do my tax assessment months/a year later - even thought I make a loss on the second sold later that tax year

Or can I just not report the first as I know the losses of the second will wipe out any CGT due

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Richard Adams

13:38 PM, 24th February 2020, About 5 years ago

I cried out for guidance advice about this 12th January and heard nothing. Now Mark T & Binks are crying out for advice also. There is so much expertise in this Forum so surely someone - an accountant member perhaps? - will know? The CGT changes will obviously affect sales of shares etc also so the new regs are extremely significant. For property sales, if indeed regardless of losses on other sales, the tax must be paid immediately then at the very least timing of the sales and a bit of jiggery pokery agreeing completion dates with buyers will come into play big time.

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jas mtharu

13:56 PM, 6th March 2020, About 5 years ago

I cannot seem to find any references to my query?
Which is if i sell a property (residential) from APRIL 06th and i make a profit on this sale can i roll over the profits into another property?
Before you had 12 months to reinvest before paying the CGT and then you could claim the payment back within 3 years if you reinvested in a like for like transaction.
Does this apply or what?
Very confused.
The property in question is not in a LTD company but in a partnership with my wife.

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Mervin SX

9:26 AM, 16th July 2020, About 4 years ago

Anyone's got a further opinion or experience of this situation?

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REMINDER – CGT rules are changing in April 2020