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Capital Gains Tax has changed

Published 5th March 2019; Updated 8th December 2019 / April 2021

  • With effect from 5th April 2020 all disposals of residential property by UK residents has to be reported within 30 days of the completion of the sale using an on-line provisional Capital Gains Tax Return, and pay a provisional amount of CGT within the same 30 days. The disposal may still have to be reported in a full Self Assessment Tax Return at the normal time.
  • With effect from 5th April 2020 all disposals of residential and non-residential property by non-residents has to be reported within 30 days of the completion of the sale using an on-line provisional Capital Gains Tax Return, and pay a provisional amount of CGT within the same 30 days. The disposal may still have to be reported in a full Self Assessment Tax Return at the normal time.

The calculation of the provisional gain will be quite complicated. The taxpayer will have to make an intelligent guess at their level of income for the tax year to decide how much of the CGT is at 18% and how much is at 28%. Not easy when you are self-employed and the disposal is near the beginning of the tax year. Then any losses brought forward may be deducted (including any losses already suffered in the same tax year) but any gains on assets other than residential property will be ignored.

If you make a loss later in the year there is no facility (at present) to reduce the payments on account of CGT that you have already made.

Non-residents also have to arrive at a value of the property at 5th April 2015 (UK residential property) or 5th April 2019 (non-residential property if they owned the property at the relevant date.

Penalties will apply to late Returns and these are in addition to any penalties under the Self Assessment regime. That leaves very little time to assemble all the information needed, such as the paperwork relating to the purchase, and of course any allowable improvements. Please contact us as soon as you have a sale agreed.

It is important to remember that very few transactions are exempt from CGT and therefore exempt from reporting. Just because no money changes hands it does not mean the transaction is outside the scope of the tax. The only disposals that are exempt are:

1) Where the gain is covered by private residence relief;

2) Where any losses or annual exemption are sufficient to cover the gain at the time the disposal occurs;

3) Where it is a no gain/no loss disposal eg.: between spouses and civil partners.

 

CHANGES IN THE LAW

The following changes are now law:

  • At present the gain accruing in the last 18 months of ownership is ignored. This is reduced to 9 months.
  • At present, when you sell a property that has been your main residence and has been let, you get an allowance of up to £40,000. The UK government has changed this allowance so that it only covers the gain arising when you had part of the property tenanted and part you occupied yourself.


If you are thinking of disposing of any asset speak to us first!