New rules for property capital gains tax
Updated: Feb 26
On 6 April 2020 new rules came into force regarding Capital Gains Tax on property sales.
The main change is that you will now have to fill in a standalone tax return and pay the tax within 30 days of completion of the sale of the property.
This mainly affects the sale of properties that incur Capital Gains Tax (CGT), such as second homes and buy-to-let properties. Most private residences are covered by Private Residence Relief, unless it was rented out at some point during ownership, or an additional home was elected as your main residence.
Previously, depending upon the timing of the sale, capital gains tax was due between 10 months and 22 months after completion of the sale. Now you will have to have your records up to date in advance so that you can meet the 30-day deadline and avoid potential penalties.
Here are some of the things you will need to know:
The date you acquired the property
Disposal costs (such as legal & surveying fees)
Cost of eligible home improvements undertaken during homeownership
Your earnings in that tax year
There are some further important changes regarding the Private Residence Relief and the Lettings Relief.
The Private Residence Relief is available when you rent out a property that was previously your main residence. You'd get the relief over the period you lived in the property, plus a grace period of 18 months. This has now been halved to 9 months.
The Lettings Relief, which is currently worth up to £40,000 per person, per property, has been withdrawn completely. It was available on properties that were once your main residence.
Calculating Capital Gains Tax on property sales can be complicated at the best of times, so with all these changes in mind, we urge you to contact us when you are planning to sell any property you own that hasn't always been your main residence.