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What are the new capital gains tax (CGT) rules from April 2020?

I am currently selling my second-owned property and am not expected to complete on my sale until the Summer-time, due to the outbreak of Covid-19, which is effectively slowing down my buyers. How will this affect me based on the new capital gains tax rules?

What are the new capital gains tax (CGT) rules from April 2020?

Any sale of UK property, by a non-UK resident or otherwise, that has not always been their main residence, and which is completed either on or after April 6th, 2020, will be subject to the new Capital Gains Tax (CGT) rules.

Firstly, they will be obliged to declare the transaction to HMRC within 30 days of sale taking place and to pay the full amount of Capital Gains Tax owed. Previously this could be reported via the self-assessment tax return process once the tax year in which the sale occurred was complete.

Secondly, where principle private residence relief can be applied, HMRC will now only allow the final 9 months of ownership to be included too in any PPR relief calculations whereas previously they allowed 18 months.

Thirdly, where PPR relief is allowed, lettings relief was previously allowed also which could further offset any chargeable gain on the property to be assessed for CGT. However, lettings relief is now being abolished for property owners who do not reside in the property while it is being partly rented.

These changes create additional pressing obligations for people that are selling and completing on properties from the start of the 2020/21 tax year, with penalties and late payment interest applied on any late filing and delayed payments.

If the speed of a current sale on your planned property disposal has been affected by the outbreak of Covid-19, there is nothing currently stated by HMRC that suggests that this as a circumstance that can be addressed or excused, despite it being out with your control.

Clarification of the main changes to the Capital Gains Tax rules from April 2020

  • A reduction in the final period of exemption, from 18 months to 9 months.
  • Legal requirement to pay full amounts of CGT owed, within a 30-day period, rather than payment via self-assessment tax return of the relevant tax year once completed.
  • Lettings relief of up to £40,000 per owner will only apply if the letting of the property was carried out whilst ‘co-living’ in the property during the rental period.

If you are unsure of how the changes will directly affect you, it is advisable that you speak to one of our tax advisers.

We are ready to assist you by introducing you to a tax specialist from our network who will ensure that you are paying the correct amount of tax.

Last updated: 8 April 2020