Posted by markgreenwood - November 29, 2019 11:26 am
Changes to Capital Gains Tax on residential properties
Principal Private Residence Relief exemption (PPR)
As a rule, most people do not generally pay Capital Gains Tax (CGT) on the sale of their home. However, do be aware that from 6 April 2020, changes to the rules on ‘final period exemption’ are set to bring higher numbers of property transactions within the scope of CGT.
What are the changes?
Firstly, the final period exemption will reduce from 18 to 9 months. In addition, Capital Gains due on the disposal of residential properties will be payable within 30 days of the completion date. Previously these transactions were reportable as part of your annual self-assessment return. Whilst you will still need to include these transactions, there will also be an additional requirement to file a ‘property disposal return’ from 6 April next year. This new ‘property disposal return’ will need to be filed within 30 days of the completion date and, at this point, the payment of any capital gain due will also be required.
How will this affect you?
If there is no gain to report or the gain is covered by exemptions or losses, you will not need to complete a property disposal return. If, however, there is a taxable gain to report you will be required to calculate the CGT due, taking into account your annual exemption for the year and, estimating the correct rate of CGT to apply.
What you will need to do
After the end of the tax year, you will complete your self-assessment tax return as usual including the property gain. Once your full income, gains and losses for the year are calculated, the true amount of CGT will be ascertained. At this point, the payment you have already made will be deducted which could result in a repayment of CGT for you.
Please be mindful that in order for usr to assist you with the timely preparation of these new forms we will need to be informed about your residential property sales as soon as they are agreed. We would advise that from 6 April 2020, anyone buying a new main residence, before the sale of a previous main residence, sells within nine months to avoid any CGT consequences.
We can help
If you would like any Capital Gains Tax help on your property or any other assets then please do not hesitate to contact your local MFW office.
