Capital gains tax changes for landlords Image by Vitalii Vodolazskyi AdobeStock_159730502

The changes could affect the amount of tax you have to pay and when

The deadlines for paying Capital Gains Tax after selling a residential property in the UK are changing from 6 April 2020. From this date UK residents selling a residential property in the UK will have 30 days to tell HMRC and pay any Capital Gains Tax owed.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

Those that don’t tell HMRC within 30 days of completion may be sent a penalty as well as having to pay interest on what they owe.

Currently a sold property which is subject to capital gains tax is reported on a Self-Assessment Tax Return. This has to be paid by 31 January following the end of the tax year.

Rachael Mabbott, Tax and Practice Manager, Keens Shay Keens

Rachael Mabbott, Tax and Practice Manager at Keens Shay Keens in Bedford, said:

“From April the full amount of tax due will need be paid within 30 days of the completion of the sale, with a provisional calculation being submitted to HMRC.

“A final computation will then be submitted either on your Self-Assessment Tax Return as normal or by updating the online service with accurate details as they are received.”

“The amount of tax due will not change under these rules. But landlords need to be aware of the new deadline as late payment will lead to penalties and interest.”

When does Capital Gains Tax apply?

You may need to make a Capital Gains Tax report and make a payment when, for example, you sell or otherwise dispose of:

  • A property that you’ve not used as your main home
  • A holiday home
  • A property which you let out for people to live in
  • A property that you’ve inherited and have not used as your main home

But you won’t have to make a report and make a payment when:

  • A legally binding contract for the sale was made before 6 April 2020
  • The sale was made to a spouse or civil partner
  • The gains (including any other chargeable residential property gains in the same tax year) are within your tax free allowance (called the Annual Exempt Amount)
  • You sold the property for a loss
  • The property is outside the UK
  • You meet the criteria for Private Residence Relief (PPR)

Rachael explained:

“Principal Private Residence relief applies where property owners are selling their main home. This may apply in part to landlords that are selling a rented property that used to be their main home.

“At present you are exempt from paying tax on the last 18 months of your property ownership regardless of whether or not it is rented out.

“From April 2020 this exemption is being shortened to 9 months which may cause an increase to the capital gains tax due.”

If you are eligible to claim PPR relief on part of your gain on the sale of a property, you may also be able to claim lettings relief.

“Lettings relief can be claimed where you used to live in the property you are selling and you have also let part or all of the property.

“This relief currently allows you up to £40,000 of tax free gains, up to £80,000 for a couple who have lived in and let the property jointly.

“From April 2020 you will only be able to claim this relief if you lived in the property at the same time as your tenant.”

​Non-UK residents and Trusts

Non-UK residents will not be able to defer payment of Capital Gains Tax via their Self-Assessment return. Any tax owed must be paid within the 30-day reporting and payment period.

Trusts will need to register with the Trust Registration Service. Existing Trusts will be able to use their UTR to access the service. A Trust for a UK resident who disposes of a UK residential property must ensure that any Capital Gains Tax liability due is reported.

Trusts for a non-UK resident who sells or otherwise disposes of a residential property, commercial property or indirect disposal must ensure that any Capital Gains Tax liability due is reported.

Both types of Trusts must pay the tax within 30 days of completion of the disposal.

Speak to you accountant if you are unsure of any changes to the taxes that you may need to pay. You can keep up to date with tax news at Keens Shay Keens news.