Important Changes to Capital Gains Tax (CGT) Coming in April 2020

February 11, 2020 11:00 am Published by

From 6th April 2020, significant changes are coming to the way that Capital Gains Tax (CGT) must be reported and paid following the sale of a second property and the period of relief that is given when moving home.

These changes are designed to increase the amount of tax collected on the disposal of a property and also collect the tax quicker.

If you hold a second home as an asset or are currently stuck in a chain when moving to a new house, these changes could affect you. Read our blog post to find out more.

What’s Changing? 

Under current legislation, those selling a property from 6/4/2020 are required to report it on their tax return by 31/1/2021, giving them 9 months to pay.

However, the new legislation means that people selling their home will be obliged to report and pay the CGT owed within 30 days of a sale, a significant decrease.

The other important change relates to the amount of time given by HMRC to those who have purchased a new home to sell their existing home.

Under the new legislation, homeowners will now only have 9 months to sell their home instead of the 18 months currently allowed.

How Will This Affect Me?

This change in legislation could have implications for those who hold a second home as an asset and home buyers that are stuck in a chain or relocating. Find out more information about how the changes could impact you below:

  • If You Are Selling a Second Home

When selling a second home after April 2020, tax must be reported and paid within 30 days of a sale. As well as giving sellers a significantly shorter financial break before tax is due, it also puts pressure on them to report and pay the tax in a short period of time.

  • If You Are Stuck in Chain or Relocating

If a homeowner is stuck in a chain or relocating, they now only have 9 months to sell their existing property. If they are unable to do this, they could have to declare and pay CGT on the gain once their old property sells.

The current rate of CGT is up to 28% on gains from a residential property, which could mean a significant tax bill if it takes longer than 9 months for the home to be sold.

Rates of Capital Gains Tax 

In the UK, the rate of CGT paid on a property is higher than other assets and the rate differs based on your income. This tax is paid on the profits made when selling or ‘disposing of’ something such as property which has increased in value since purchase.

When selling a property, you only pay CGT on the ‘gain’ you made, not the amount of money you received from the sale. This figure can be calculated by deducting the amount the property was purchased for from the price it sold for. The current rates of CGT for property are:

Taxpayer Band Rate of CGT
Basic Rate18%
Higher Rate28%
Additional Rate28%

All taxpayers benefit from a CGT allowance, meaning they can earn a certain amount before they are taxed on it, which can mean some individuals pay no tax when selling their home if the value has not increased considerably. Like other tax-free allowances, this can’t be carried forward into a new tax year.

Talk to The Experts

If you’re a UK based individual and are currently in the process of selling your residential property and need advice from an expert, we can help. Give one of our team a call today on 0117 3790810 to book your free no obligation consultation.

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This post was written by Steph Roffey

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