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Capital Gains Tax (CGT) is changing
Government rules relating to Capital Gains Tax are changing for UK landlords next year. Ensure you know what the changes will be and what they mean for you, especially if you’re planning on selling any additional property you own.
The changes taking effect from 6 April 2020 will have a large impact on the time you have to pay your Capital Gains Tax bill.
Capital Gains Tax (CGT) rules as they currently stand
Capital Gains Tax in relation to property is a tax on the profit when you sell a property that has increased in value. The gain (profit) you make is taxed, not the total amount of money you receive.
- You do not have to pay CGT if your gains each year sit within your tax-free allowance.
- You DO pay CGT on the profits you receive from selling a property that isn’t your main home. For example on:
- Buy to let properties
- Business properties
- Land you own
- Any properties you’ve inherited
- CGT isn’t due on your principal private residence.
New legislation from 6 April 2020 onwards
Capital Gains Tax accumulating on the sale of your non-principle residential property will now be payable within 30 days of your completion date. This will need to be done by submitting an additional property disposal return and making a payment to HMRC.
The difference is that currently your gains are declared through your self-assessment tax return so the CGT normally doesn’t need to be paid until the following tax year. However from April 2020 you will need to pay the full amount of CGT owed within just 30 days of the sale being completed.
How this affects you
- You run the risk of penalties and fines if you sell a property and are not aware of the changes having taken place.
- There is a new property disposal return form to familiarise yourself with.
- CGT rates are based on your total income for the year, so you’ll need to be as accurate as possible in your estimates when calculating the CGT on your recently sold property.
- You will need to keep up good communications with your accountant throughout the year to ensure you avoid any penalties and fines.
Read more: How to reduce CGT when selling your house
How we can help you
We can help you prepare for the changes in ruling coming up next year, and can give you more detail on what it means and how it affects your financial planning. Contact us for a more in depth view of what the new legislation means for you.