Disposal of UK Residential Property

Q. I am thinking of selling my UK buy to let property next year, can you tell me when I need to pay the capital gains tax?

A. For sales next year this will depend on whether the sale takes place prior to 6 April.

Currently, when a UK residential property is sold and there is tax due on the gain from the sale, this is reported on an individuals Self Assessment tax return for the year to 5^th April, in which the gain is made. The Capital Gains Tax (CGT) will be payable and due in full by the 31^st January, following the year to 5^th April.

However, from 6^th April 2020, any CGT due on the disposal of the property will be payable with 30 days from the completion of the sale. This change was announced by the Government back in 2018 and was due to come into force from 6^th April 2019 but was delayed and will come into force with effect from 6^th April 2020.

Under the new rules, the CGT will be due within 30 days from the sale completion along with the new online property disposal return. It is expected that HM Revenue & Customs will be able to enquire into this return on a separate basis to the taxpayer’s Self Assessment Tax Return. If there is no gain on the sale of the property or the gain is covered by exemptions or losses, the property disposal return should not have to be completed.

However, if there is a gain after allowances and allowable losses, the taxpayer must complete the return and calculate the CGT due accordingly by using the rates of 18% or 28%, depending on whether the individual is a basic or higher rate taxpayer.

As usual, the taxpayer will then complete their Self Assessment Tax Return accordingly and they must also include the gain on the sale of the property. At this point the correct CGT liability can be calculated after considering all other sources of income and the CGT already paid will be deducted. This could potentially result in a repayment of CGT for the taxpayer if they have originally overpaid.

There are a number of factors that should be consider in relation to all of the above, and detailed advice, taking into account individual circumstances, should always be obtained.

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