Preparing for Tax Changes on Property Sales – 30 day CGT deadline from April 2020

Preparing for Tax Changes on Property Sales – 30 day CGT deadline from April 2020

If you’re a UK resident who is planning on selling a residential property next year, it’s best to start thinking ahead. Otherwise you might be caught out by changes to Capital Gains Tax regulations.

In recent years, the rules for non-UK residents in relation to Capital Gains Tax (CGT) have become much more stringent. Anyone disposing of UK land or property has been expected to notify HMRC within 30 days, regardless of whether any tax is due.

From April 2020, similar rules are to come into force for UK residents, although they will only apply to residential properties and where there is actually tax due for payment.

At the moment, if you dispose of a property, you declare it on your tax form the following year to meet the 31^st January deadline.  From next April, not only does the filing of the CGT return become mandatory within 30 days, but so does the actual payment.

For the Revenue, the arrangement has the obvious advantage of bringing money in at an earlier stage. There is a danger, however, that many property owners will be caught unawares, as little has been done to publicise the change.

If a seller waits until their annual tax affairs are being sorted out by their accountant, they’re already going to be at the stage where they are liable for a penalty. And while it’s possible HMRC may take a ‘light touch’ approach to enforcement initially, there are no guarantees.

It’s worth bearing in mind that you might well have no tax to pay, as you may be wholly covered by principal residency rules, another exemption, or losses previously incurred. If you do owe CGT to HMRC, however, you’ll not only have to declare it within the 30-day period, but also include it in any self-assessment return you subsequently file. The CGT liability will be provisional until it can be finalised in light of your other tax affairs.

Finally, an interesting thought, if you are considering disposing of a property next year, it might make sense to exchange contracts before 5^th April, that way, you can happily defer payment of tax for another nine months, but do talk to your accountant and take appropriate advice.

If you would like any further information please contact Jen Lawton, head of personal tax on jl@barlow-andrews.co.uk or 01205 527451.