Changes to Capital Gains Tax on Residential Property

Are you thinking of selling residential property in the near future? If so, you may wish to bring forward the sale date. This is because some reliefs are changing, and new reporting and tax payment requirements are being introduced.

From 6 April 2020, when you sell your main residence or a house which has been your main residence, you need to be aware of the following changes:

Capital Gains Tax

Currently, your final 18 months of ownership is treated as exempt for Capital Gains Tax purposes. This is irrespective of what the property has been used for, as long as at some point the property was your main residence. As from 6 April 2020, this period is being reduced to 9 months.

Lettings Relief

Lettings Relief is an additional relief available, up to a limit of £40k, if you have let out your main residence on a commercial basis. As from 6 April 2020, relief will only be available if you continue to live in the house while renting it out.

If you are thinking of selling one of a number of properties, you may wish to consider selling the property that attracts Lettings Relief. If you are not considering a sale, you may be able to “crystallise” the relief by making a gift to a family member or indeed a family trust. This latter route will need careful consideration.

Report a sale of residential property

Currently, any Capital Gains Tax due is payable on 31st January following the tax year in which the disposal takes place, with the disposal being reported on the self-assessment tax return.

As from 6 April 2020, individuals and trustees with gains on the disposal of residential property will be required to make a return and a tax payment on account within 30 days of completion. These changes are very onerous and bring the due dates for reporting and payment in line with the current rules for non-UK residents.

If you would like to discuss any of these changes in more detail, please contact our property tax team on 01903 234094.

A version of this blog originally appeared on the blog of MHA member firm MHA Moore & Smalley