This article reflects on the changes in Capital Gains Tax (CGT) from 6 April 2020 and what this might mean for you if you are selling a second property.
From the 6 April 2020, individuals or trustees disposing of a second home or a rental property (i.e. residential properties that are not your main principal residence, through a sale, a gift, or into a trust), are required to report to HMRC any chargeable capital gain arising on the property within 30 days of completion of the disposal. They are also required to make a payment on account of the CGT liability within the same timescale, or incur penalties and interest charges.
Due to coronavirus (Covid-19) HMRC did not issue late penalties on any transactions completed between 6 April and 30 June 2020, provided the gain was reported and any tax due was paid by 31 July 2020. Anyone who completes the sale of a property from 1 July 2020 onwards, has 30 calendar days to report and pay the tax due. Transactions completed from 1 July 2020 will receive a late filing penalty if they are not reported within 30 calendar days. Interest will be charged if the tax remains unpaid after 30 days for all transactions from 6 April 2020.
Sale of Probate Properties
One area that needs to be highlighted is the sale of property held in an estate. Personal Representatives, Administrators, or Executors who sell a property as part of the administration of an estate do need to consider carefully whether there are any CGT implications. If the proceeds from the sale of the property exceed the probate valuation on death, there could be a CGT liability on the estate. Any capital gains tax liability must be reported to HMRC within 30 days of completion, and the tax due paid out of estate funds within the same timeframe.
We are now more than four months into the new Capital Gains Tax regime introduced by HMRC on the 6 April 2020. From our experience the reporting and paying of the CGT within the 30 day deadline is working well. We have successfully dealt with a number of clients who have sold a property under the new regime. The feedback received from our clients has been very positive.
The HMRC system for dealing with CGT is geared to online reporting. However, we have a number of clients who do not have online access and in these cases HMRC has provided on request, a form for completion that has enabled these clients to report their capital gain under the new regime.
The tax department works closely with our in house conveyancing team and this partnership is proving to be very beneficial to our clients; providing a seamless process dealing with both the sale of the property and any consequential capital gain liability.
If you are unsure whether a property you are considering selling will fall under the new capital gains tax regime please contact us.