Capital Gains Tax (CGT) due on residential property disposals by UK residents does not currently have to be reported or paid until the deadline for submitting a self-assessment form. This can be up to 22 months after the disposal took place.

From April 6th 2020, CGT on all disposals of UK residential property will be payable 30 days after completion. The changes will mainly affect those individuals selling a second home or rental property on which full private residence relief or other reliefs such as capital losses are not available. This new rule also applies to trustees and personal representatives of a deceased estate but not to companies holding UK residential property. 

Previously CGT would be reported via a self-assessment tax return with any CGT payable by 31st January following the end of the tax year where the disposal (including most gifts) took place.

From 6th April 2020 the chargeable gain on disposal of a UK residential property must be reported by submitting a residential property return within 30 days of completion. If the property is owned jointly, each owner must submit a return. The entire amount of CGT is payable by the same date.

How will this affect your clients?

If you have relevant clients who are looking to dispose of a second home or let property:

1. You will need to advise your UK clients that from April 2020 they should tell HMRC about their UK residential property sales as soon as they are completed and that CGT may be due within 30 days.

2. UK clients who are considering selling may wish to consider disposing of UK residential property before 5 April 2020, to avoid having to complete the return and also to extend the CGT payment date

3. Post 6 April 2020 your clients will need a quick turnaround of their CGT calculations. Note that capital gains tax is the top slice of total taxable income and capital gains in the tax year of sale. There are certain allowances for estimates and assumptions - the calculation of the capital gains due may complex and client will not want to overpay!

How we can help you and your clients

We can help to ensure that the residential property return is correctly filed and any CGT due is accurately calculated within the 30 day payment window. 

Where the calculation is complex and more time is needed we will be able to provide the client with an estimate of the CGT in order for them to make a ‘payment on account’ with HMRC pending submission of the annual self-assessment return. 

If you would like to know more about this service please contact me via david.rickwood@shawgibbs.com