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New CGT rules and filing requirements – UK residential property

New rules came into force from 6 April 2020 for disposals of UK residential property, and they are now subject to a new capital gains tax reporting and payment regime.

New rules came into force from 6 April 2020 for disposals of UK residential property, and they are now subject to a new capital gains tax reporting and payment regime.

Where such disposals have resulted in a gain, there is a requirement for the taxpayer (which includes individuals, partners of partnerships, trustees and personal representatives) to report the disposal to HMRC and pay any capital gains tax due within 30 days of the completion date.

Any gains realised on the disposal of other types of property continue to be reported under the Self Assessment reporting regime, and the tax on these is only payable by 31 January following the tax year in which the exchange of contracts takes place.

The new rules will therefore affect all taxpayers who sell a property which has not been used as their main residence, such as landlords, and also those whose main residence is not covered in full by Private Residence Relief (PRR). Tax bills may well be higher as in addition to the new filing and payment deadlines, letting relief has been abolished and the PRR relief applying to the final 18 months of ownership, whether or not the property continues to be your main residence, has been reduced to nine months. Complications will also arise when calculating the amount of capital gains tax due at either 18% for basic rate taxpayers or 28% for higher rate taxpayers as the taxpayer will have to determine whether they are paying basic or higher rate tax for a year that has not yet ended. In addition, capital losses arising later on in the same tax year on other assets cannot be taken into account for the purposes of the calculation - a refund of overpaid capital gains tax only being available to be claimed via the Self Assessment tax return after the tax year has ended.

Disposals of residential property will not fall within this new regime if any of the following points apply:

  • A legally binding contract for the disposal was made before 6 April 2020 (even if completion occurred after 6 April 2020)
  • The disposal qualifies for full PRR
  • The disposal was made to a spouse or civil partner
  • The gain realised (including any other chargeable residential property gains in the same tax year) falls within the individual's annual exemption (£12,300 for the 2020/21 tax year)
  • The property was sold at a loss

HMRC have launched a new online service to allow taxpayers (or their agents) to report and pay any capital gains tax due. Separate returns will need to be filed for each owner of the property, even if the joint owner was your spouse.

Late filing penalties will apply if the disposal is not reported within 30 days and interest will accrue if the tax remains unpaid after 30 days.

In conclusion, this new reporting requirement (in addition to including the disposal on your Self Assessment tax return) and the acceleration of the payment of tax will present additional work for taxpayers at an already busy time and we would recommend that you contact Butler & Co in advance of the sale of any UK residential property so that we can advise you on the requirements, prepare the necessary computations and file an online return to HMRC on your behalf.

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