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Beware new CGT on residential property

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The UK Government has been scrutinizing the taxation of residential property, which has become increasingly onerous over the last few years. Individuals looking to sell or dispose of residential property can expect a number of further changes to how they might be taxed after 6 April 2020, with less generous reliefs and more stringent reporting requirements.

The sale of residential property often incurs a Capital Gains Tax (CGT) liability. Currently, UK residents who sell or dispose of residential property that attracts a CGT liability are required to submit a tax return by the 31 January after the end of the tax year in which the sale/disposal is made (i.e. between 10 and 22 months after the disposal). From 6 April 2020, all owners of UK property (whether resident in the UK or not) must file a return and pay the tax due within 30 days of completion.

Those subject to the new reporting requirement would do well to have their documentation to hand before the sale to avoid a last-minute rush or penalty charges for late filing. The information required will include the acquisition date and cost, details of any improvements made during the ownership period, as well as amounts spent, for example, conveyancing fees. Where there is no tax liability, there will be no requirement to report.

The situation is complicated by the fact that (as is the case now) the rate of CGT payable will be dependent on the amount of income the taxpayer receives during the tax year in which the property was sold. The taxpayer will therefore be required to provide a reasonable estimate of the CGT payable, based on an estimate of his or her income for the year. Basic rate tax- payers will continue to pay CGT at 18% and higher rate tax- payers at 28%. Those with fluctuating levels of income may find the tax liability difficult to estimate.

The reporting must be done online, requiring taxpayers to have a Government Gateway account or to digitally authorise a tax agent to do it for them. More details on the CGT reporting requirements are expected before the 6 April 2020 deadline. Individuals should make sure they are aware of the filing requirements well in advance of selling a property to avoid being caught out by penalties for late filing.


If you or your clients would like further information please contact Scott Robinson, on 01548 856444 or email scott@sabrefinancial.co.uk .

Sabre Financial is a trading title of Sabre Financial Planning Ltd. Sabre Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.


 

 

 

 

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