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From April 2020, there will be some changes to the way property tax is collected by HMRC.

Here’s a breakdown of what you need to be aware of:

Example 1

Current Legislation

The last 18 months of ownership for a residential property are ignored for capital gains tax purposes if the home has been occupied as your private residence at any given time (in addition to any actual periods of occupation also being ignored).

New legislation from April 2020

From April 2020 this will reduce to the last 9 months of ownership (and any actual periods of occupation).

Consideration

Properties that will have capital gains which have been occupied as your private residence may benefit from extended tax relief if sold prior to April 2020.

Example 2

Current Legislation

If your residential property has been occupied by you as your private residence and has been let at any time, or is let when you sell it, you can claim a letting relief that can make a significant impact on any Capital Gains Tax you have to pay.

New legislation from April 2020

From April 2020 you will only be able to take advantage of this lettings relief if you are in shared occupancy with your tenant.

Consideration

Properties that will have capital gains which have been occupied as your private residence and let out to tenants at some point may benefit from extended tax relief if sold prior to April 2020

Example 3

Current Legislation

75% of residential finance charges is disallowed as a property business expense and is replaced with a basic rate (20%) tax credit.

New legislation from April 2020

From April 2020, all finance costs incurred by UK residents as a result of letting a residential property will be disallowed as an expense of their property business and replaced with a basic rate (20%) tax credit.

Consideration

Extra tax could be payable on your 2020/21 tax return – payable by 31 January 2022. 

Example 4

Current legislation

Non UK residents that sell land or property in the UK have to prepare a formal Capital Gains Tax computation, return this to HMRC, and pay any tax due within 30 days of the sale.

New legislation from April 2020

From April 2020 this will also apply to UK residents who sell land or property in the UK.

Consideration

In some cases capital gains tax associated with property sales would not be payable to HMRC until 18 months after the sale. This timeframe will be cut to 30 days from April 2020.

As ever, property taxation can be a complex area. If you are letting or selling a residential property in the UK, or plan to do so during the new tax year from 6 April 2020, and would like further advice on how to calculate what tax will be due please contact us on 03301 071 558 or [email protected].