Disposing of Property – from April 2020

Currently, when UK residential property is disposed of, a UK taxpayer declares any capital gain made on their self-assessment tax return. The Capital Gains Tax (CGT) is due to be paid on or before the 31 January following the end of the relevant tax year e.g. a sale of a property in May 2018 would need declared on the 2018/19 tax return and the CGT due by 31 January 2020.

Since 2015, non-residents have had to inform HMRC within 30 days of a residential property sale and pay the tax at the same time.

Changes to the rules

From April 2020, all disposals of UK residential property will need to be reported and the CGT paid within 30 days of completion. A return must be made to declare the sale and calculate the tax due. If there is no gain made, or the gain is covered by exemptions or losses, no return will be required. Once a return has been made, including the estimated CGT paid, the taxpayer must file a self-assessment tax return. This has to include the property gain, by the usual deadline. The CGT already paid will be deducted when the total CGT is calculated.

There have also been changes to the reporting requirements of non-resident individuals. Instead of only having to report residential sales, they must now report sales of all property including commercial. The tax will also need to be paid within the 30 day deadline.

Getting the tax right

CGT is calculated at either 18% or 28% depending on the other income of a taxpayer. It also depends on the income tax rate bands they have available. Therefore, it is important to understand tax and be able to calculate the estimated CGT due.

Understating the CGT could result in cashflow issues. For example, an individual thinks they have paid all of the CGT, but discover they owe an additional amount of CGT when they file their tax return. This could be up to 22 months after the sale. Similarly, overstating the tax will mean that the taxpayer will need to wait until they file their self-assessment tax return to receive a refund.

How we can help

This is a brief overview of the new rules and you should seek expert advice if you have any queries. MHA Tait Walker can calculate the CGT due and submit a return on your behalf.

One of our fellow MHA member firms, MHA Macintyre Hudson, have released a blog on Capital Gains Tax planning, which you may find really useful.

Please contact Laura Dickson or Dorothy Johnston for more information or to discuss your requirements.