Act now to avoid new CGT rules on Property

From April 2020, new rules will require some property owners to pay any Capital Gains Tax (CGT) liabilities much sooner than they anticipated. The changes could also increase the amount of tax people have to pay.

At the moment, the disposal of any residential property which is not the tax payer's main home, i.e. a second home or a buy to let property, would be liable for CGT if it has increased in value during the period of ownership. The tax has to be paid by the 31st January of the following tax year, as part of the tax payers self assessment tax return. This means the tax payer currently has between 10 – 22 months from the sale of the property in which to pay their taxes. 

However, from 6 April 2020, new CGT rules from HM Customs and Revenue (HMRC) will require the property owner to make an interim tax return and pay any tax which is due, on the sale of the property, within 30 days of the transaction taking place. The tax payer will also be required to report the property disposal on their annual self-assessment form, along with any other asset disposals they have made during the tax year. This means the amount of CGT an individual pays may change during the year. 

Additional tax changes will also effect selling your former home

Not content with reducing the amount of time some property owners have in which to pay their taxes, HMRC are also clamping down on home owners who are renting out their former home. Whilst homeowners do not pay tax on the sale of their main home, they are required to do so if they have subsequently let the property and the value of the property increased during the time the landlord wasn't living there. At the moment the landlord can claim 'principal private residence relief' for the last 18 months of owning the property, even if they aren't living in it prior to the sale.

However, from 6 April 2020 this 18 month relief period is being shortened to just nine months, which is likely to increase the amount of CGT the home owner will have to pay.

Changes in lettings relief could see an end to £80,000 of tax relief

Further CGT changes could also have a significant impact on how much tax landlords have to pay on the disposal of their former home which they have been letting to tenants. At present, a landlord can claim up to £40,000 of lettings relief (£80,000 if the property is owned by a married couple) on any gains from the sale of their former home. However, from April 2020 this relief will only be available if the landlord lived in the property with their tenants.

Daniel Wilkinson, Partner at Wilkinson and Partners Chartered Accountants said, “HMRC are keen to increase the amount of tax revenue and to collect taxes sooner rather than later, hence restricting certain tax reliefs, shortening the periods in which they are calculating tax and asking for payments to be made much earlier. Property owners who would be affected by these new changes should look to sell their properties now, so that the transaction has a chance of completing before 5 April 2020. “

Home owners are urged to take advice from their accountant on these forthcoming changes and the complexity of the new CGT rules.

If you have any concerns about these changes or about selling your property, please contact Daniel Wilkinson on 01274 518200 or email