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Changes to Capital Gains Tax for sale of Residential Properties

There are a number of changes being bought in on 5 April 2020 which affect Capital Gains Tax on the sale of Residential Property. Some will affect everyone and some will only affect those who have lived in their property as their main residence for only part of its ownership.

Below is a brief outline of the main changes.

Timescale to report and pay tax

Currently if you are UK resident and sell a property during a tax year, you have until 31 January following the tax year end to declare your gain and pay any Capital Gains Tax due. However, any sales of residential property that are completed after 5 April 2020 will have to be declared and any CGT paid over within 30 days of completion.

Changes to Principle Private Residence Relief

Principal Private Residence Relief (PPR) is a tax relief which is designed to ensure that the sale of a person’s main residence is exempt under certain conditions. Generally, if you own one home, live in it for its entire ownership and sell it, any gain will be tax-free. If you have only lived in the property for part of its ownership then only part of the gain on sale will be exempt but generally the last 18 months of ownership will still be exempt. From 5 April 2020 HMRC are reducing this 18 month period down to 9 months.

Changes to Lettings Relief

Those who have lived in a property as their main residence for part of its ownership and also let the property out can currently benefit from Lettings Relief on sale which provided relief for the period of time the property is let (capped at the lower of the PPR relief or £40,000). From 5 April 2020 the rules regarding Lettings Relief will be tightened and will broadly only be available for landlords who share occupancy with the tenant.

This change can have a dramatic effect of the Capital Gains Tax payable for a property sold which has been the tax payers main residence and has also been let out.

Haines Watts

The Tax Team at Haines Watts have a wealth of experience in dealing with a wide variety of tax issues. To read more about our tax services and recent blog articles click here.

If you would like to discuss any of these changes and how they could affect you please contact our tax department on 01379 640555 or visit our webpage here.

Want to know more? Call us on 01842 760 007 or email thetford@hwca.com

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