Audrey Blair, a Senior Associate within the Residential team and Shona Currie of our Wills, Estates and Succession Planning team provide an overview of the Capital Gains Tax changes which came into effect on 6th April 2020.
from 6th April 2020 all UK residents are required to report to HMRC the sale of a residential property, whether in the UK or overseas if:-
- The property is not used as a Principal Private Residence
- The property is a holiday home
- An inherited property that is not a Principal Private Residence
- A property that is used for letting purposes.
The report should be made on a new Capital Gain Tax Form, which is a separate requirement from a Self-Assessment Income Tax Return Form, within 30 days of the date of completion of the sale and any tax due thereon should be paid. The tax payment will be treated as a payment on account towards the overall tax liability for the year. Penalties and interest will be charged if payment is not made within the designated time limit.
In order to calculate the tax due on the gain you will be required to estimate your other income, for the year in question, in order to establish the correct capital gains tax rate. The current rates are 18% for gains within the basic rate tax band or 28% for gains within the higher rate tax band.
The capital gain will still require to be included on your Self-Assessment Income Tax Return Form, if you are taxed within the Self-Assessment system. Any payments made via the “payment on account” will be credited towards your overall tax liability for the tax year of the disposal.
The new rules also apply to Executors of deceased estates and Trustees.
You DON’T need to report the sale of a residential property to HMRC if the following apply:
- The contract for the sale of the property was completed prior to 6th April 2020
- Principal Private Residence Relief is allowed
- The sale is to a spouse or civil partner
- Any gain (including other sales) is within the annual Capital Gains Tax Allowance
- A loss has occurred on the sale of the property
- The property is out with the UK
- Non-UK residents must continue to report sales of property, within the 30 day period, regardless of whether there is a gain or loss.
We at BTO can assist with all aspects of a property transaction including advising you on your tax obligations, so please do not hesitate to get in touch.