We want to ensure that you are up to date with all the latest changes that affect property investors. The UK government is introducing new changes to the capital gains tax rules in April 2020. This is going to have the most impact on additional properties that you purchase.
What is the Impact of these Tax changes?
For property investors and landlords that sell a property which is not their main residence there are changes to the capital gains tax rules on the profits made. Here are the main changes:
- The time that you have to settle your capital gains tax bill on such a transaction will change
- The amount of tax relief claimable will change
- There are some changes to letting relief
Tax Payment Deadlines Tightened
Right now any capital gains tax that needs to be paid on a property transaction happens with your annual self assessment return. So if you sell a property at the beginning of the financial year you do not have to pay any capital gains tax until the following year.
So for example if you sold a property early in the 2018 – 2019 tax year you would not have to declare and settle your capital gains tax until 31 January 2020.
With the new capital gains tax changes in April 2020 you will have to pay your capital gains tax on a property sale within 30 days of the completion date. There are no changes to the cost of the tax so the amount will be the same. You just have to pay the tax faster.
So if you sell a property for profit after April 2020 then you need to factor
this in to your finances. It is important that you are on top of this because there are stiff penalties planned for those that miss the 30 day deadline.
Changes to Private Residence Relief
With private residence relief (PRR) there is no capital gains tax payable for any profits accrued from the sale of a primary residence. This can also apply to a landlord that lived in a home as their own residence but now want to sell.
Currently you do not have to pay any tax on the last 18 months that you were the owner of the property. It doesn’t matter if you rented it out or not. This means that you have more time
to sell your property once you have moved out before you will incur capital gains tax.
With the capital gains tax changes coming in April 2020 the length of time will shorten from 18 months to 9 months. So if you have moved out of a property considered your main residence for more than 9 months you will probably have to pay capital gains tax on any profits when you do sell.
If you qualify for PRR you may also qualify for letting relief. This will help to reduce your capital gains tax liability up to £40,000 tax free profits for a single person and £80,000 for a couple.
The new taxation changes in April 2020 will mean that you can only claim letting relief if you were living in the property when you sold it. This applies when you have a tenant and you are sharing occupancy.
