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NON-RESIDENTS: BEWARE OF CHANGES TO CAPITAL GAINS TAX

Published 5th March 2019; Updated 21st March 2019

NOTIFYING HMRC

  • Until 5th April 2019 you must file a disposal return whenever you dispose of residential property.
  • From 5th April 2019 you must file a disposal return whenever you dispose of a UK asset including: residential property, student accommodation, commercial property, hotel rooms, care-home rooms, and other investments.

  • The notification to HMRC MUST be filed within 30 days of completion (closure) or you will be charged a large penalty (sometimes over £1,000).

  • We will deal with the notification return on your behalf, but can only do so if you tell us about the disposal in good time (before completion).

  • The full calculation is entered in the annual tax return but after 5th April 2020 it must be included in the disposal notification.

TAX PAYABLE

  • Every disposal may attract tax on the increase in value over the period of ownership, or since 5th April 2015 if you owned the asset before that date.

  • There are several reliefs and allowances that may be available, that will reduce the taxable gain.

  • The first £11,700 of increase in value is tax free (this figure changes each year and is correct for individuals for the year ended 5th April 2019).

  • The rate of tax applicable to the rest of the gain on the disposal of residential property will be either 18% or 28%.

  • The rate of tax applicable to the rest of the gain on the disposal of other property will be either 10% or 20%.


MAKING YOUR PAYMENT TO HMRC

  • At present our clients will pay Capital Gains Tax when paying their other tax for the year in question (ie: a disposal in the year ended 5th April 2019 which gives rise to a tax liability results in payment in January 2020).

  • From 5th April 2020 it is proposed that a calculation is submitted with the notification of the disposal and payment is also made at that time (within 30 days of the disposal).



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.



COMPLICATIONS

There are many traps and pitfalls when it comes to UK Capital Gains Tax, and a very simple and honest mistake can result in additional tax of many thousands of pounds. Furthermore the law changes frequently, making this a very complicated piece of legislation to deal with.

Before making any transfer, please contact us for advice, it could save you many thousands of pounds!