If you’re thinking of disposing of any residential property in the next month or so, then you may want to act now.

From 6th April 2020, there will be a major change to the reporting and payment of Capital Gains Tax on residential property disposals. And it could mean you will need to pay that Capital Gains Tax much sooner than expected.

What are the changes to Capital Gains Tax (CGT)?

As of the 6th April, disposals of residential property must be reported to HMRC within 30 days of completion. Payment of the associated Capital Gains Tax must all be made on the account, within that same period.

Previously, CGT was payable along with income tax by 31st January following the end of the tax year.

This change is a significant reduction in the amount of time that sellers will have to pay up the CGT they owe.

For example: If you were to complete on your property on April 1st 2020, you wouldn’t need to pay CGT until 31st January 2021. But if you complete on May 1st 2020, you would need to pay CGT by May 31st 2020.

That’s why if you’re close to completion on any residential property you own, we’re urging you not to delay.

Does this change apply to my own home?

No, if you’re selling your own private residence – and no capital gains tax is payable – then this 30-day reporting and payment obligation will not affect you.

There may be more changes to come too

Last year, draft legislation was issued for consultation that recommended further clampdowns on current Capital Gains Tax relief. This legislation may be incorporated into the next Finance Act and would mean further changes to private residence disposals.

These could come into effect after April 5th.

The first change is aimed at preventing a tactic known as “second home flipping”. HMRC want to crack down on individuals using this relief as an aggressive tax planning strategy. It will see the exemption for the final period of ownership reduced from 18 months to 9 months.

From 6th April 2020, there will be a major change to the reporting and payment of Capital Gains Tax on residential property disposals. ”

Suzanne Preston

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