From the 6th April 2020, when you sell a second home you will be faced with new capital gain tax (CGT) rules. Changes will affect the amount of CGT you pay AND when you pay this.
These new rules apply to individuals who are selling residential property they own personally.
When will tax be paid?
From 6th April when you sell a residential property (that is not your home) you must submit a provisional calculation of the gain to HMRC within 30 days of completing the sale. You must pay this amount over to HMRC within 30 days too.
Changes to calculating tax due:
|Rule||Current Rule||Rules from 6 April 2020|
|Letting Relief||When you sell a residential property, which was once your main residence but has been rented out, you can deduct letting relief of up to £40K from a capital gain.||Letting relief will no longer be available, unless the letting of the property occurred while you were living in it.|
|Reduction in taxable gain due to final period of ownership||Currently the last 18 months of ownership of the property are treated as qualifying for principal private residence (so this part of the gain is exempt from tax).||From 6 April 2020 tax relief will only be provided for the final 9 months of ownership therefore halving the relief.|
What does this all mean?
Quite simply you are going to pay more tax when selling a residential property AND have less time to pay the tax. There will be limited options available for tax planning in this situation as you only have 30 days from completion to pay the the tax bill.
If you are thinking of selling any residential property (that isn’t your main home) then it would be worth having a chat with us about it.