CGT Rules Set to Change for Buy to Let Landlords
Landlords face another tax change from April 6, 2020, as capital gains tax rules for selling a home are overhauled.
The timescale for reporting the sale and paying due tax shrinks to just 30 days from completion. (update: see here for an increase to 60 days from 27 October 2021)
Landlords missing the deadline will face penalties and an interest charge on the amount of CGT due. CGT is paid on the profit made between the sale price and purchase price of a home, considering some expenses and tax reliefs. The tax is applied to selling, gifting or transferring a residential property that is not the main home.
Homes with a capital gain on property disposal that should be reported within 30 days include:
- A buy-to-let or house in multiple occupation
- A holiday home
- An inherited property
But you won’t have to make a report and make a payment when:
- A legally binding contract for the sale was made before April 6, 2020
- The disposal meets the criteria for Private Residence Relief
- The sale was made to a spouse or civil partner
- Any gain (including any other chargeable residential property gains in the same tax year) is within your tax-free allowance (called the Annual Exempt Amount)
- The property disposal was for a loss
- The property is outside the UK
HM Revenue & Customs will open a new online service for reporting CGT in time for the rule change. Expats and non-residents should also report any home disposal in the UK within 30 days, whether CGT is due or not.
“If you’re a non-UK resident you must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a capital gains tax liability within 30 days of completion of the disposal, said an HMRC spokesman.
“You will no longer be able to defer payment of Capital Gains Tax via a Self-Assessment return, and any tax owed must be paid within the 30-day reporting and payment period.”
Tax rules regularly change; please see the .gov website for the latest information
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Tax is an aspect of residential property investment which is often overlooked. There are many twists and turns to consider at all levels, whether for income tax, capital gains tax or inheritance tax. It is vital to get the ownership structure right and ensure that all tax relief, allowances, and claims are made.