If you sell something that’s increased in value since you bought it, you may incur a capital gains tax charge, at 28% for residential property or 20% on other assets.

That could apply to personal possessions that are worth £6,000 or more, shares that aren’t in an ISA or personal equity plan, business assets, or property that’s not your main home.

Next year, landlords and second-home owners will be the focus of new measures that relate to capital gains tax. 

Here’s what’s set to change from 6 April 2020, and while it’s correct at the time of writing it may be subject to future change or a government U-turn. 

30-day window to pay capital gains tax

Currently, anyone who sells a residential property and needs to pay capital gains tax on it will need to report that gain as part of their self-assessment tax return, and pay the liability by 31 January following the end of that tax year.

From April 2020, a payment on account will have to be made much sooner – within 30 days of the completion of the sale, using a new return. 

Anyone who has reported gains this way won’t have to take them into consideration when determining whether they need to register for self-assessment.

HMRC says collecting the tax sooner will help to “reduce error and increase compliance”.

Those selling their main home shouldn’t be affected by the change.

Final exemption period reduction

Private residence relief allows people to sell their main residence without having to pay tax on it. 

It covers the time they spent living in the property, as well as an additional period to allow for delays in selling it. 

That extra time included in the relief, also known as the final period exemption, will be halved from 18 months to 9 with the aim of bringing more property sales into the scope of capital gains tax.

The last reduction to the final exemption period, in 2014, saw it decrease from 36 months to 18.

Lettings relief

Lettings relief is changing, too. This currently offers up to £40,000 in relief on capital gains tax to people who let out a property that is or has been their main residence.

From April 2020, it will only be available when the owner of a property is in shared occupancy with the tenant. 

The Chartered Institute of Taxation has warned that as a result of the change, “very few sellers will qualify for lettings relief”, which could mean higher capital gains tax bills.

Talk to us

If you’re planning on selling a property next year and want to know if you’ll be affected by these changes, we’re happy to help.

Get in touch for personal tax advice.