Residential Property Tax Changes from 6 April

From 6 April 2020, there will be a ‘seismic change’ [John Bunker, Chair of CIOT’s Private Client UK Committee] in how tax is paid on residential property.

All UK residents who sell or give away residential property after 6 April giving rise to a Capital Gains Tax (CGT) liability must submit a standalone online return to HMRC and pay the tax due within 30 days of completion of the sale. This is a considerable difference to the current system where CGT is payable between 10 months to 22 months after the sale.

This new scheme has not been widely publicised by HMRC and the vast majority of clients are unlikely to be aware of the new payment deadline. Penalties are likely to be imposed for late payment.

The calculations will not necessarily be easy and will be based on the taxpayer estimating their likely income and gains for the rest of the tax year (so crystal balls at the ready!). This prediction will be used to calculate the correct rate of tax – either 18% or 28%.

It is not clear at the moment quite how this system will work and what the online return will look like, but property owners should begin to gather the information needed to estimate their tax liability well before the 30-day deadline.

For those people who exchange contracts before 6 April 2020, they will still be within the old regime even if completion takes place on or after 6 April. However, if the contract was conditional and the condition is not satisfied until on or after 6 April then the new 30-day timescale will apply.

More details are likely to be posted on www.gov.uk website as we get closer to 6 April.

Please make clients aware of these changes if you think they are likely to be affected. If clients would like us to assist with the calculations then our Tax and Trusts team should be your first point of contact. They can be contacted through this website or by calling 0330 404 0778.