Private Residence Relief

Watch out for earlier tax payments on residential property sales!

November 25, 2019

A TAG Accountants Group warning about the new rules for reporting and paying Capital Gains Tax on UK property sales within 30 days.

Reporting and Paying Capital Gains Tax on Time

Further to our August article regarding the coming changes to private residence relief for owners of residential property, our tax advice team here at TAG Accountants Ltd, Wolverhampton wish to remind landlords about changes to the timing of any capital gains tax (“CGT”) payments that may be due from the future sale of residential property.

These changes will take effect from 6 April 2020 and are expanded upon below.

In the future, there will be 30 days to pay!

For disposals of residential property occurring on or after 6 April 2020, any CGT then due must be paid within 30 days of the completion date.

Currently, the period between making a capital gain and paying the CGT due can be as much as 22 months, meaning the CGT arising from a gain made by a UK resident individual on the sale of a residential property on 6 April 2019 would not be payable until 31 January 2021.  

Back in 2018, the Government proposed a change to the rules such that CGT would become payable within 30 days of the completion date for all UK residential properties disposed of by a UK resident. Originally this was due to be effective from 6 April 2019 but has since been delayed until 6 April 2020. Alongside the revised payment date, there is also a requirement to file a new online property disposal return with HMRC within the 30-day period.

If a disposal is such that there is no gain to report or if the gain made is covered by exemptions or losses, it is understood that there will be no requirement to complete a property disposal return.  

Of course, the tax team here can help you with all this, so if in doubt, just give us a call. 

If there is a taxable gain to report, the CGT due must be calculated taking into account the vendor’s annual CGT exemption for the year and an estimate of the correct rate of CGT to apply (18% and/or 28% depending on the size of the gain and the vendor’s other anticipated income for the year).

Following the end of the tax year, the vendor will then complete their self-assessment tax return, including the property gain. Once full income, gains, and losses for the year have been calculated, the correct amount of CGT will be known, and the payment that was made after 30 days will be deducted. 

This could result in either a further payment or alternatively, a repayment, of CGT to the vendor.

So, what should you do?

If you are planning to sell residential property, it is worth ensuring that the disposal is completed prior to 6 April 2020 in order to take advantage of the much longer CGT payment period currently available. 

It is now even more important than ever that those selling applicable residential property advise their accountant of any property sales that have been agreed upon. In this way, their designated expert can help them calculate any tax that may be due and, where applicable, submit a property disposal return to HMRC within the new deadline.

As ever, our team at TAG Accountants Ltd, Wolverhampton are here to help you calculate any CGT and complete the relevant forms. For expert advice in this area, call us now on 01902 783172 to explore how one of our friendly experts may be able to help you or alternatively, just click HERE to contact us via our website.

We look forward to hearing from you!