Major change in capital gains tax rules for landlords
On 6th April 2020 capital gains tax rules change and landlords will now have just 30 days to pay any capital gains tax due. Prior to 6th April 2020 if you sold a property on 1st May 2019, you wouldn’t have to pay the capital gains tax until 31st Jan 2020. That’s 17 months to pay tax after sale. So this is a dramatic rule change that will adversely affect your cash flow. So, UK landlords who sell a residential property after 6th April will need to report and pay any tax due within the shorter timeline of 30 days. If you don’t report on a timely basis you will face penalties and interest charges. This CGT change does not affect the sale of your personal home or principal private residence.
For higher rate taxpayers CGT is payable at 28% on gains less any CGT allowance, for basic rate taxpayers CGT is payable at 18%. So if you work on a salary of say £35,000 then a capital gain of over £35,000 will place you as a higher rate taxpayer making your CGT liability at 28%. HMRC have a real time capital gains tax service that you can use.
The change in the rules is an ongoing and systematic focus that government and HMRC are taking on landlords. In addition to accelerating tax collection times, this change may also be an attempt to force landlords to keep better records. Finance Equation Ltd, provide property cloud accountants solutions for landlords, which improve record keeping and timely submission of returns to HMRC.
Changes other than Capital Gain tax rules from 6th April
- Lettings relief will now only apply to landlords who have shared occupancy with a tenant, i.e. live in landlords
- The final period exemption will be reduced from 18 months to 9 months, again this seems to encourage owner occupiers with one main residence. The special rules given to those with disability, and those in care, remains at 36 months.
Contact the Finance Equation Ltd to see how we can assist you to submit on time and reduce your property taxes