Have you been hearing the term ‘Capital Gains Tax’ a lot recently? There are some important changes happening which could affect you. We asked our Tax Manager, Chris Barlow to explain what the changes will mean for you.
There is already a fair amount of legislation regarding residential property. However, there are more changes on the way. Recent speculation in the headlines has alluded to unachievable deadlines and many owners being unaware of the changes. In fact, the changes only reinforce the importance of seeking professional tax advice before selling a property.
Capital Gains Tax (CGT) is the tax paid on the profit from selling (or ‘disposing of’) an asset that has increased in value since the date of purchase. It’s important to remember, it’s the gain you make that is taxed, not the amount of money your receive. At the moment, these gains are recorded in an individual’s personal tax return and are payable by 31 January in the following tax year of which the sale took place.
From next year, there are some key changes happening with the payment and reporting deadlines for CGT, and it is important that anyone involved with the sale of residential properties is prepared for these changes. As from 6 April 2020, CGT due on the disposal of residential properties will be payable within 30 days of the completion date. These new payment and reporting deadlines will apply to individuals, trustees and personal representatives of deceased persons who sell or otherwise dispose of residential property. For example, those disposing of second homes or rental properties.
With less than a year to go before these new CGT changes take place, their success will depend on effective communication between accountants and clients. It is important to notify your accountant straight away with notice of any residential sales, as the danger is many owners are not aware of these impending changes, which could lead to penalty charges from HMRC if you fail to disclose of any disposals in time. We are advising our clients to contact us immediately when making a sale of any residential property so we can calculate the tax returns and communicate with HMRC accordingly and avoid any unnecessary penalties from HMRC.