On 6 April 2020, a number of changes will come into force that will impact sales of residential property and the capital gains tax (CGT) that vendors will need to pay following completion. This is relevant where you have more than one house that you occupy or you have let properties and are selling one of them.
The two major changes that will apply from this date are as follows:
1. CGT on residential properties will need to be reported AND paid within 30 days after completion of a sale; and
2. The Principal Private Residence (PPR) relief (which reduces tax on sale where a house has been your main residence for some or all of the time you have owned it) is becoming more restricted (see our recent blog for more detail). This is typically relevant if you have more than one house.
Thus, property owners who sell on or after 6 April 2020 may notice significant differences in the results of their sale compared to if they had sold even just one day prior to this date. These differences are highlighted below:
Sale on or before 5 April 2020:
– Any CGT is payable on 31 January 2021
– The gain is reported on your 2019/20 tax return, to be submitted by 31 January 2021
– You may be able to claim PPR on the last 18 months of ownership even if you didn’t live in the house then, and may also have a lettings relief claim to enhance the tax relief
Sale on or after 6 April 2020:
– Any CGT must be paid within 30 days of completion (for example, if the property is sold on 6 April 2020, the CGT must be paid by 6 May 2020)
– The gain must be reported on a separate property sale tax return, which must also submitted within 30 days of completion
– You can claim PPR on only the last 9 months of ownership where you didn’t live in the house then, and may no longer be eligible for lettings relief – meaning the taxable element of the capital gain may be higher
Selling houses can take time so, if you are considering selling a house which hasn’t been your sole residence throughout its ownership, or are in the sale process already, we advise you to speak to us as soon as possible to discuss your options.
Our property tax expert Jonathan Cunningham would be delighted to speak with you – please click the button below to get in touch.
