Property owners in the UK are facing significant changes to the Capital Gains Tax (CGT) payment process when selling residential properties. Starting from 6 April 2020, sellers will have a tighter deadline to report and pay any tax owed, which is crucial for both UK residents and non-residents.
Key Takeaways
From 6 April 2020, UK residents must report and pay CGT within 30 days of selling a residential property.
Non-UK residents are also required to report sales within the same timeframe, with no option to defer payment.
A new online service will be launched to facilitate reporting and payments.
Overview of Capital Gains Tax
Capital Gains Tax is levied on the profit made from selling or disposing of an asset that has increased in value. This tax applies to various types of property transactions, including:
Properties not used as a main home
Holiday homes
Rental properties
Inherited properties not used as a main home
Changes for UK Residents
For UK residents, the new rules mean that if you sell a residential property, you must notify HM Revenue and Customs (HMRC) and pay any CGT owed within 30 days of the sale's completion. Failure to do so may result in penalties and interest on the owed amount.
You will not need to report or pay CGT if:
A legally binding contract for the sale was made before 6 April 2020.
You qualify for full Private Residence Relief.
The sale was made to a spouse or civil partner.
Your gains fall within the Annual Exempt Amount.
You sold the property at a loss.
The property is located outside the UK.
Changes for Non-UK Residents
Non-UK residents must also adhere to the new reporting requirements. They are required to report any sales of UK property or land within 30 days, regardless of whether there is a tax liability. The option to defer payment through Self Assessment has been removed, meaning any tax owed must be settled within the same 30-day period.
New Online Service
To assist property owners in navigating these changes, HMRC will introduce a new online service. This platform will allow users to report and pay any CGT owed efficiently. Guidance on how to use this service will be available from April 2020, ensuring that both individuals and agents can comply with the new regulations.
Advice for Agents and Trustees
Agents acting on behalf of clients must register with the Agent Service and ensure that any CGT liabilities are reported and paid within the 30-day window. Similarly, trustees managing UK residential properties must also comply with these reporting requirements, ensuring that any tax owed is settled promptly.
Conclusion
The changes to Capital Gains Tax payment for UK property sales represent a significant shift in the responsibilities of property owners. With the introduction of a 30-day reporting and payment window, it is essential for both UK and non-UK residents to understand their obligations to avoid penalties. The new online service aims to streamline this process, making it easier for individuals and agents to comply with the updated regulations.
Sources
GOV.UK, GOV.UK.
GOV.UK, GOV.UK.
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