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Changes in Capital Gains Tax on Private Residences – Plan Ahead for April 2020

There are two phases of change coming in April 2020, both of which dramatically affect the tax paid on residential property sales by UK resident individuals.

Whilst these changes have not yet been legislated they have also not been withdrawn following consultation las There are two phases of change coming in April 2020, both of which dramatically affect the tax paid on residential property sales by UK resident individuals. t year and we should, therefore, assume that these changes will be introduced from 6 April 2020 as planned.

Changes Proposed for Relief on Homes

At present when you sell a property that has been your main residence at some point during its ownership the last 18 months, even if you were not living there, are treated as qualifying as your Principal Private Residence and exempt from tax.

From 6 April 2020 this period is being reduced to 9 months.  This will not affect you if you are living in your own home up until the point it sells and have always done so, however, it will affect you if you have already moved out of the property prior to the sale and that period extends beyond 9 months.

Withdrawal of Lettings Relief

 At present, if you own a property which has been your own home at some point during your ownership but also rented out for part of the period there is a relief of up to £40,000 per person which can be claimed on a property even if you have not lived in it for a long time.

From 6 April 2020 the relief will change and only be available to those who are in shared occupancy with a tenant and will be no longer available to property owners who moved out and simply rented their property in its entirety to someone else.

The withdrawal of this relief is likely to dramatically increase capital gains tax due when a property of this type is sold and if you are planning to sell a property to which these rules apply you may wish to consider bring that forward and pay particular attention to the exchange date which is the critical date for taxation.

We would also recommend getting in touch with us immediately to understand the implication of these changes and how they affect you.

Payment of Capital Gain

In addition to the changes to the reliefs above the Government have also announced a change in the payment date for capital gains tax due on disposals by UK residents of residential properties.  This will now be due 30 days after the date of disposal (being the date of completion) rather than paid as part of your self assessment which at present can be as much as 22 months after the date of sale.

This will mean that you will need to make a stand alone report and payment within 30 days of the disposal.  To be able to comply with this you will need to have all of the relevant information to hand to allow us to calculate this payment on your behalf.

If you need any advice or help with this, please do not hesitate to contact us on 01237 472071 or email [email protected]

 

 

 

 

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