From April 2020 the deadline for payment of Capital Gains Tax “CGT” due from the sale of residential property will be shortened to 30 days after the date of sale.
Current Rules
An increase in value on a property from the date of sale from the original ownership will trigger a CGT liability if the property does not qualify for certain tax reliefs during the period of its ownership. These reliefs relate to when the property qualifies as your main residence and whether it has been let for a qualifying period of time.
If CGT charge is due as a result of the sale, UK residents currently pay CGT via self-assessment tax returns. The tax year runs from 6th April to 5th April and any tax due will be payable the 31st January after the tax year ends.
This means that CGT due on the sale of property is currently paid between 9 and 21 months after the date of the disposal.
New Requirements
From April 2020, HMRC requires UK residents to submit a CGT return and pay any CGT due within 30 days of completion of the sale of residential property.
The requirement to submit a CGT return will be different from the self-assessment tax return process entirely and will only be required where there will be tax due on the sale.
These requirements will not extend to the disposal of foreign residential property where the foreign country has a double tax agreement with the UK or, where the gain relates to a person who is taxed on the remittance basis.
What should I do now?
Individuals who are considering a sale post April 2020 should take time to ensure that they are prepared to understand whether a payment or a return is due.
Individuals in the UK who are resident and not taxable on the remittance basis are entitled to an allowance for CGT before tax becomes due and this is currently £12,000 per individual.
If you are currently registered for self-assessment then you will have a unique taxpayer’s reference ‘UTR’ however, if you are not currently in the self-assessment regime or have not been in the past you may now need to request a UTR from HMRC.
Careful consideration will need to be taken to ensure that the correct amount of tax is calculated. As some property disposals will be taking place at the start of the tax year, it is difficult at that point to determine the relevant tax rates if an individual’s tax affairs vary between the higher and lower rates.
Further guidance is expected to be issued by HMRC. In the meantime we are happy to help assist in this process in the future and we will update this article when further information is available.
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This tax article was published in July 2019 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.