Changes to Capital Gains Tax Loom

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When a person in the UK sells a property they may be required to pay capital gains tax on any profit they make. This is not generally the case when you are selling your main home, but is likely to apply in instances where someone is selling a buy-to-let property or second home. You may also be subject to capital gains tax if your home is partly used as a business premises or you lease part of it out.

The level of capital gains tax paid is dependent on the individual’s tax bracket i.e. are they a basic tax ratepayer or higher / additional rate taxpayer. At present, the basic rate capital gains are taxed at 10% and, at the higher and additional rates, 20%.

Whilst, for personal taxpayers, capital gains tax is paid between 10 months to 22 months after the date of sale, the government is set to bring this forward to 30 days after the date of disposal. This will significantly cut the time an individual has to calculate and report their capital gains tax. The change will take place for any disposals on or following 6 April 2020.

This is being seen as a move by HMRC to level the playing field between UK resident and non-resident landlords, with the latter already required to disclose and pay their capital gains liability within 30 days, or can elect to do so on 31 January each year provided that they are in the self-assessment regime.

The types of disposals that will be affected will be:-

  • Any direct or indirect disposal of land which meets the non-residence condition; and
    Any other direct disposal of UK land on which a residential property gain accrues and is made on or after 6 April 2020.
  • Where a disposal is made that meets these requirements, a return must be made within 30 days of the completion date (rather than an exchange of contracts). No returns are required for no gain / no loss disposals and for disposals where no tax is due. This return will also include a declaration by the person making it that the information contained within is to the best of their knowledge and belief, correct and complete.

As for payment, this will be due on the date that the return is due i.e. 30 days after disposal. Or, if there is more than one disposal in the year, the tax will be calculated on the second disposal, taking into account the first and deducting the tax paid at that time from the total due.

For more information contact our tax specialist, Femi Ogunshakin, using femi.ogunshakin@nexa.law.

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