Are you up to speed with new Capital Gains Tax 30-day rule for residential property?

The UK has seen a significant change to the rules surrounding Capital Gains Tax (CGT) on the disposal of residential property.

These historic changes could significantly affect how much and when CGT payment is due, so if you are a landlord, property investor or a homeowner, you need to be aware of these changes and plan future property disposals accordingly.

What has changed?

From 6 April 2020, those selling residential property have only 30 days to file a CGT return and make an advance payment towards their tax bill where CGT is due.

This is significantly different from the current rule, which allows people to pay CGT on the disposal of a property up to 22 months after the sale, as part of their self-assessment return.

The new system will require sellers to complete an online form where they identify a gain. However, they will still need to include this information on the following year’s self-assessment return for reference.

How will this affect homeowners?

Thankfully, most people will not pay CGT on the sale of their main home, thanks to Private Residence Relief (PRR). However, those with larger properties (with grounds, including all buildings, that are more than 5,000 square metres) or second homes, will be affected by this new rule.

Final Period Exemption (FPE)

The Final Period Exemption (FPE) for (PRR) has also been shortened.

This means that those individuals required to pay CGT on a property’s sale will only be exempt from paying CGT on the gains made in the final nine months of ownership, instead of the final 18 months.

A longer exemption period means that more relief can accrue on two properties (an unsold one and a new one) simultaneously, which the Government believes “is out of line with the intention of the exemption, which is meant to protect those who move to a new main residence but are unable to sell their original home immediately”.

However, there are special rules that give those in or moving into care homes, and people with a disability, 36 months of exemption and this has not changed.

Letting Relief 

Lettings Relief has also been restricted to property owners who have shared occupancy of a property with their tenant at some point during their ownership.

Under the former rules, taxpayers who let a property that either is currently or used to be their main residence, could claim Lettings Relief of up to £40,000 when they sell that home, with up to double this amount available to a married or civil partnered couple.

For many who rent their home out before moving overseas, during a separation or after a loss of a loved one, this could have a significant impact.

For help and advice,  please contact our expert team at Milsted Langdon today.

Posted in Blog, Tax.