There are approximately 1.2 million disposals of residential property every year in the UK. The majority of these are the sale of main residence, and therefore have no Capital Gains Tax (CGT) liability.
However, if you own a second home or have a buy-to-let property there are some important changes to CGT that may have repercussions for your tax bill.
What has changed?
If you are a UK resident disposing of a property that’s not your main home, you will soon be liable for CGT 30 days after the date of disposal. The 30 days is calculated from the completion date (not the exchange of contracts).
This 30-day rule only applies if:
- UK residential property is sold on or after 6 April 2020; and
- CGT is chargeable.
Note that this does not apply where the gains are not chargeable to CGT. For example, where the gains are covered by private residence relief.
Payment will be made by submitting an online return and making a payment on account. Where properties are held jointly or in partnership, each owner is required to submit a return in respect of their share of the disposal and pay the associated tax.
What does this mean for you?
- If you are planning a sale, contact your adviser to make them aware. They will assist you to gather the information that is required and calculate the potential tax payable, so that funds can be reserved from the proceeds of sale to pay the tax.
- Ensure regular communication with your adviser. They should have the most up-to-date records detailing costs and enhancement expenditure, enabling them to act swiftly if you decide to put your property on the market.
- You should speak to your adviser to review the sale of the main residence to establish whether the gain attracts partial relief rather than full relief.
Commenting on the changes, Christopher Wrighton said: “The 30-day window was proposed to reduce the time lag between a gain arising and the tax being paid. As a property owner, it’s another thing to consider in an already complex selling process. Landlords and second-home owners must consult their adviser as soon as they put their property on the market so that they are well-prepared in advance of the return.”
If you are considering a property sale and would like to discuss these changes in more detail, please contact Christopher Wrighton, or your relationship principal.