Advance warning of tax changes

Posted on June 22, 2019

There are a number of significant changes coming into effect from 6 April 2020 with regard to residential property, as follows:-

Capital Gains Tax on Residential Property
  1. The final period exemption

The final period exemption which extends private residence relief for capital gains tax will be reduced from 18 months to 9 months.

Please note that the special rules allowing 36 months relief for the disabled and those in a care home will not change.

  • Lettings relief

Lettings relief of up to £40,000 which is currently available on rented property which has at some time been your Principal Private Residence will be reformed so that it is only available in cases where the owner remains in ‘shared occupancy’ with the tenant.  Withdrawal of this relief could increase the capital gains tax bill on the sale of a property by up to £11,200 for each owner.

  • Reporting sale and payment of Capital Gains Tax

Perhaps the most significant change is to the timing of reporting the disposal of a residential property and payment of the capital gains tax due.  At the moment details of the sale only need to be reported on your annual self assessment return and payment made by the following 31 January which could be up to 22 months after a sale.

For sales of residential property taking place after 6 April 2020, HMRC must be advised of the amount of any taxable gain and an estimated tax payment made within 30 days of completion.

Even though these changes are due to come into effect from 6 April 2020, they are subject to a consultation first. We will of course keep you informed of any amendments following the consultation.

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