Update On Capital Gains Tax And Property

This week, I thought I would summarise the changes announced to Capital Gains Tax Relief for your Principal Private Residence that came into force on the 6th April 2020 ...

If you had sold your main residence before this date, and Captial Gains Tax (CGT) due on that sale would be declared on your self-assessment tax return. It needed to be filed by 31st January in the tax year following the disposal.

If you were an overseas resident selling a UK property, then after 6th April 2015, you had a maximum of 30-days from the date of completion to file a return and pay any CGT due.

"This requirement has now been extended to all UK residents!"

So now, when anyone sells the main residence (both UK and non-UK residents), if there is Capital Gains Tax due then it must be paid within 30-days from the date of completion. If that gain is covered by any reliefs or exemptions, then the normal reporting time is allowed.

As long as the taxpayer has classed the property being disposed of as their main residence in the last 18 months (the 'deemed occupation' period), then Principal Private Residence (PPR) Relief applies. This means there should be no CGT due in this period.

This final months allowance was there to recognise that not all moves are seamless from one residence to the next; however, HMRC has seen some taxpayers take advantage of this, to obtain PPR on both the new residence and the old residence at the same time.

So to tackle this avoidance measure (and to generate some extra income), Principal Private Residence Relief is now only available for nine months before the disposal of the property.

"There are other important changes too!"

Lettings Relief has always been a valuable opportunity, especially for those individuals classed as 'accidental' landlords. When a property has been let out that had been the taxpayer's main residence, there was up to a £40,000 exemption on Capital Gains Tax.

From the 6th April 2020, Lettings Relief is now only available when the landlord shares occupancy with the tenant. For many landlords, this has now essentially wiped out the relief.

Spouse and civil partner transfers have also been affected, in certain situations, reducing PPR relief from the 100% it used to be to something much less as the total history of the property also transfers to the donee spouse now.

"This rule has been extended to all properties now, not just the main residence!"

As always, when selling property or changing ownership between spouses, I strongly recommend taking professional tax advice as a larger Capital Gains Tax bill could now be due without you realising it.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.