HMRC are changing the way capital gains tax is collected as of 6th April 2020. Currently the tax payable on a gain from residential property can be delayed for up to 22 months. The changes will result in all capital gains tax on residential property becoming payable within 30 days of the gain taking place.
The taxpayer will now be responsible for making HMRC aware of the disposal on a property disposal return. The return will be due 30 days after the sale and so will any capital gains tax payable. However, if you have not made a gain on the sale of the property you do not need to declare this, it will be detailed on your Self-Assessment return as normal. (Remember you do have a annual capital gains exemption allowance in addition to your personal allowance!).
The tax rates remain at 18% for basic rate tax payers and 28% for higher rate tax payers. The property disposal return will allow you to determine if you are a basic rate or higher rate payer for the current tax year. HMRC refer to the tax liability as a ‘payment on account for CGT’, this is because the gain is still then declared on the Self-Assessment return after the tax year has ended. If the tax payer paid higher rate tax and they should have paid basic rate tax, you would be entitled to the difference as a refund.
We would advise to contact us in the event of a planned sale, we can then make you aware of the potential tax liability and let you know in advance. If you have any questions on this matter please contact our office and we’d be happy to help.