If you are planning to sell a property in the UK which you currently let and which has previously been your main residence, an important tax deadline is on the horizon. Ensuring the sale exchanges on or before 5 April 2020 could allow you to maximise any Capital Gains Tax (CGT) relief. Julian Smith, Head of Tax, explains why.
Changes in UK tax law mean it will shortly become more complicated to claim relief on Capital Gains Tax relating to a let property. This is because of two main reasons:
- The amount of time you lived in the property and the last 9 months of final ownership will be exempt from CGT. This final ownership period is being scaled back to 9 months from the current 18 months. The only criteria is that the property must have been occupied as your main residence at some point during the period of ownership.
- From April 2020, this relief will only be available where there is shared occupancy (when you and the tenant both live in the property at the same time). In virtually all cases, this will exclude you from qualifying for this relief – which can total up to £40,000 per owner or £80,000 for a married couple! Do remember that the relief is only available if you are letting out a property which was previously or subsequently your main residence.
With this in mind it may be worth considering putting any suitable property on the market sooner rather than later.
Selling property whilst living abroad
Those not resident in the UK have been expected to notify the tax office about any Capital Gains Tax returns when selling a UK property since 6 April 2015. However, the fact there are only 30 days to make this submission after the sale is completed is quite controversial. We have seen many clients being charged late filing penalties as a result of this very tight deadline.
From 6 April 2019, this system was extended to include the sale of all UK property (including land and commercial property) by non-resident individuals and companies.
New filing requirements to come
The Government are now planning to roll out stricter filing requirements to all UK resident individuals selling UK residential property from 6 April 2020. Again, the gain will need to be reported to H M Revenue & Customs within 30 days of completion. Under this new proposed legislation, a payment towards the Capital Gains Tax due will be required within 30 days of the completion.
Thankfully there are some exclusions; there would be no tax to pay where the sale is your main residence or if you sell an offshore property if you are a UK resident. Furthermore where a loss is generated from the sale, the filing of a return is voluntary.
For advice on any area of tax planning, please get in touch.
Julian Smith, Head of Tax