Capital Tax Changes - Disposal of Residential Property

From 6 April 2020, UK residents disposing of UK residential property will have new capital gains tax reporting and payment obligations.

With the recent changes coming into effect from the 6th April, we wanted to give you a little more information to prepare you for any potential changes to your situation.

Capital Gains Tax changes

Currently, where a capital gain arises for UK residents on the sale of residential property, the capital gain is declared through the annual self-assessment tax return with any capital gains tax payable by 31 January following the end of the tax year in which the disposal is made.

From 6 April 2020, UK resident individuals who dispose of UK residential property will be required to complete a special 'residential property return' and report the disposal to HMRC within 30 days of the date of completion of the sale and at the same time pay to HMRC the tax that is due. Failure to comply with these obligations will result in HMRC imposing interest and potential penalties.

These changes will affect anyone selling a buy-to-let property, a second home or their main residence where full private residence relief is not available.

No returns are required for no gain/no loss disposals and for disposals where no tax is due. Taxpayers who are within self-assessment will have to report the gain on their annual tax return as well as completing the 30-day residential property return.

Changes to reliefs

For disposals from 6 April 2020, there are also changes to the capital gains tax reliefs available. These include changes to lettings relief, which will be restricted to landlords who share occupancy with their tenants and a reduction to the final period exemption for private residence relief, which is to be reduced from 18 months to 9 months. These changes could potentially substantially increase the amount of capital gains tax payable.

How we can help

The introduction of a 30-day reporting and payment requirement is a significant change to the administration of capital gains tax. Individuals need to be aware that these new rules are coming into force and need to ensure that their records are up to date, so that the relevant information can be provided very quickly after the completion date.

So if you are thinking of selling or gifting a UK residential property, please speak to us as soon as possible, so that we can ensure you meet the new reporting requirements. We offer a free, one hour consultation to talk through your individual situation.

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