Capital Gains Tax changes on residential property

16 April 2020

On 6 April 2020, a seismic change in the tax obligations for people with second homes took place. HMRC has changed the rules on reporting and paying Capital Gains Tax on the sale of residential property in certain circumstances. If there new rules are not adhered to, it will lead to pecuniary penalties. Terri Halstead talks you through what you need to know.  

Less than a month to pay

Capital Gains Tax on residential properties has undergone a speedy change, speedy being the operative word. From 6 April 2020, where somebody has a second home they choose to dispose of, they will have to register with HMRC’s digital service, calculate the tax to pay and – crucially – pay it within 30 days of completion. The changes potentially affect owners of holiday homes, buy-to-let properties, inherited properties, main residences which have been let out at some point, owners of homes with grounds in excess of half a hectare, and owners of houses which have been partly used for business purposes.  

Dramatic reduction

The danger of such a tight turnaround is people being unaware of the changes and failing to comply. You need to be aware of the dramatically reduced time limits and be ready to make the return and estimate the CGT due. What do I mean by dramatically reduced? Well, up until 6 April 2020, second home owners had at least nine months after the tax year you made the disposal to report and pay the CGT. This gave a time period of up to 22 months to work out the tax and pay it. Under the new rules, you have 30 days. The reason for this dramatic change is, primarily, for HMRC to get that tax into the coffers quickly. The ICAEW estimates this to be a one-off additional yield of around one and a quarter year’s tax, in the order of between £5bn and £8bn. It’s also part of an attempt to clamp down on buy-to-let landlords and indeed the announcement about changes to CGT was made in the same Budget that introduced the restriction on the deductibility of mortgage interest. Although the measures were mentioned a couple of years back, with the unwavering focus and attention on Brexit, they have probably not been at the forefront of anyone’s mind. As CGT computations are not always straightforward, if people are not prepared, they might not be able to collate the information necessary to make the CGT calculation in time.  

A light touch?

There will be no difference to the tax rate – it remains 28%. Although we can hope that HMRC will apply a light touch to penalty provisions in the first year while conveyancers, advisers and taxpayers familiarise themselves with the rules, as with all tax issues, forewarned is forarmed.  

For help calculating CGT on a property sale or any other tax matter, get in touch with our advisors or direct with me using the options below.


Terri Halstead

Tax Partner