For many, owning and selling their own home is thought to be tax-free. Unfortunately tax is never quite as simple as that. Usually, when selling a main residence, most will be exempt from any Capital Gains Tax (CGT). This is due to Principal Private Residence Relief (PPR).

Complications can arise when a property has been let for some or all of the period of ownership.  CGT will need to be calculated and the tax paid to HMRC.

Existing Rules

Under existing rules, if you were to sell a property that doesn’t fully qualify for PPR Relief, the CGT would need to be calculated. This would be done on your self-assessment tax return for that year.

Tax Due 

Any tax payable would not be due until the 31 January following the end of the tax year in which the gain arises. This in effect means that if you sold a property on the 6 April 2019, the tax on this gain would not be due until 31 January 2021, giving nearly 22 months to calculate and pay any tax due.

New Rules take effect from 6 April 2020

New rules mean that all Capital Gains Tax will be payable within 30 days of the sale, gift or disposal of the property being completed. If a property is sold on 6 April 2020, the tax will need to be calculated and declared on a CGT return.

Tax Due

Any tax due will need to be paid by 6 May 2020. If sold a day earlier on the 5 April 2020, the taxpayer will have until 31 January 2021 to calculate and pay the tax!

Other changes from 6 April 2020

There are also other unfavourable changes coming in from 6 April in relation to the current “Lettings Relief” and also the final period of ownership when calculating the PPR relief due. These changes could result in significantly more CGT being due than if the property was sold prior to the 6 April 2020.

Are you in the process of selling a residential property?

We strongly recommend that you consider these changes and discuss the consequences sooner rather than later after completion.

Need advice?

 If you need any further advice regarding the capital gains tax changes, please contact Leanne Hickman.

Capital Gains Tax