In significant tax changes effective from April 2020, the reporting and payment date for capital gains on the sale of UK residential property for UK owners, is changing to just 30 days. These rules have been in place for overseas owners of UK residential property for some years now.
Before 5 April 2020 rules
Prior to 5 April 2020 the sale of a property was only reported on the Self-Assessment Tax Return for that period.
Example. A disposal on 7 April 2019 would have been reported on the 2019/20 tax Return which is due for submission by 31 January 2021. The tax due on the property sale is also due by that date.
After 5 April 2020 rules
If, however you sold your property on 7 April 2020, whilst this is still reportable on the 2020/21 tax Return due for submission by 31 January 2022, there is an obligation to notify HMRC within 30 days of the completion date. In this instance that would be 7 May 2020. An estimate of the tax payable is also due on this date.
So, in a strange twist, the tax due on a disposal 12 months later is actually payable almost 9 months sooner.
What should you do?
It will become more important than ever for taxpayers to be aware of any potential tax charges on selling property in advance of the disposal being made so they can appropriately budget for this cost.
At the time of writing this article (prior to the Budget 11 March 2020) the sale of your main residence is exempt from capital gains tax. These changes could therefore only impact if you are considering selling a property when you have owned more than one property at the same time.
There is also a further change to the interest relief on property letting on 6th April 2020, so if you would like to know more about determining your tax liabilities on property letting, developing or selling please contact mandy@beatons.co.uk to arrange a meeting or call 01473659777.