Notwithstanding the current lockdown and emergency measures the Treasury is undertaking, and notwithstanding also the current hiatus in the property market, I wanted to let you know about a major change in the reporting and payment of Capital Gains Tax (‘CGT’) on UK residential property disposals which HMRC is implementing with effect from 6 April 2020.
From that date, it will be necessary within 30 days of completion of the disposal to report the disposal of the property and pay CGT on account to HMRC. This will be a significant acceleration of the payment date as CGT is currently payable with income tax on 31 January following the end of the tax year.
So if a property is sold on 1 April 2020, CGT will be due on 31 January 2021 along with the return declaring the gain; if instead it is sold on 31 May 2020, the sale would need to be reported and CGT would need to be paid by 30 June 2020.
Note that the new 30-day reporting and payment obligation will not apply where no tax is payable such as the disposal of your principal private residence or a sale at a loss.
OTHER CHANGES TO SALE OF PROPERTY ON OR AFTER 6 APRIL 2020
There are important changes to private residence relief for disposals after 5 April 2020:-
- the exemption for the final period of ownership will be reduced from 18 months to 9 months (historically it was 36 months); this applies where a former main residence is disposed of and is intended to give relief where the owner has moved to another main residence until the former residence is sold
- “lettings relief “will be abolished, except for situations where the taxpayer lives with the tenant. This generous relief currently provides an exemption of up to £40,000 per owner where the former main residence is rented out.