New Capital Gains Tax (CGT) Rules When Selling A House

Everyone needs to be aware of the new CGT rules when selling property. If you are a solicitor, conveyancing specialist or property lawyer make sure you are aware of how this will affect your clients.

There will be new CGT rules introduced from April 2020. In today's article, we're going to focus on the reduced reporting period. You can check out the official government page for the full details.

If any of your clients have been affected by these changes, we would be delighted to help them with the CGT returns. We are Capital Gains Tax specialists and have a huge amount of experience dealing with property disposal.

The Old Rules

Under the old system, if you sold a property and made a profit, you reported it via a standard tax return. You had from the end of the tax year, until the 31st of January the following year to pay.

This, of course, only applied when there was a CGT liability. But it meant that people selling their home didn't have to worry about filing, or paying, until the following year.

For property lawyers or conveyancers, there was no need to give specific tax advice to clients in the immediate period following the sale.

The New Rules

Under the new rules, you have to report the details to HMRC and work out a provisional calculation of how much CGT you owe.

You now only have 30 days from the completion of the sale before you have to tell HMRC and pay the provisional liability. This applies to sales of:

• A property that's not your "main home"
• A holiday home
• A buy-to-let property
• Somewhere you inherited but isn't your "main home"

Even though you follow the 30 day rule, you'll still have to report the gain on your tax return the following January. In fact, the tax return will be used to make any adjustments between the provisional sum paid and the final sum due. This could be because you won't know exactly which tax band the gain will fall under until the end of the year.

If you are a conveyancer, make sure your clients are aware of the need to file and pay within 30 days. If they miss the deadline, they will be liable for penalties and interest.

Rules For Non-UK Residents

These new rules are actually an extension of what foreign resident sellers of UK property have faced for the last few years.

The difference is that non-UK residents have to report any sale of UK property or land to HMRC within 30 days. This applies even if no CGT liability has arisen.

Under the new rules, however, foreign residents will also have to pay any tax due within the 30 day window. Previously they had been able to defer payment until the following year via self assessment.

Again, if you have clients in this situation, make sure they are aware of the new rules. We are happy to work with them on any aspects of their tax filing.

Exceptions

There are some situations where you don't need to make a report, including if you sell the property:

• Outside the UK
• For a loss
• To a spouse
• For less than your tax free allowance

If you would like to check whether your clients need to file a CGT return within 30 days, or you would like to discuss any of the issues raised in this article, please get in touch.