CGT - new rules for payment of tax on some disposals
New rules relating to Capital Gains Tax (CGT) will come into force from 31st July - and it might affect buy to let and holiday home owners the most.
After being temporarily suspended due to Covid-19, the new 30-day deadline for reporting and paying CGT on residential property disposals is now back in force. This is particularly prevalent, given that many people may be choosing to sell up now that the Government has raised the threshold on Stamp Duty.
However, whilst the new Stamp Duty threshold gives with one hand and aims to incentivise people into moving, these new rules take away with the other. Those who are looking to dispose of residential property will need to make sure they are setting aside enough money to pay the CGT - particularly if you’ve no other source from which to fund it.
In fact, it’s a good idea to get a calculation before the sale of the property as there are a number of steps you may wish to take - such as instructing an accountant for the first time.
What’s more, for those who are buy-to-let or holiday home owners hoping to make a profit from the sale of their property to fund retirement or downsizing, the calculation of CGT becomes even more important, as it may leave you with less money in the bank than you originally thought.
CGT calculations apply to gifts as well, so that is worth bearing in mind if you plan to donate funds from proceeds to grandchildren for a house purchase, for example, as again you may find you have less than you thought.
Whilst this has proved to be a sting in the tail for non-resident UK tax payers for some time, it looks as though HMRC has taken the gloves off and levelled the playing field for resident tax payers too.
UK-resident individuals, trusts and personal representatives with a CGT liability must first verify their identity online and create a Government Gateway login, and then set up an account on HMRC’s new online system, Capital Gains Tax on UK Property, which is separate to the existing personal tax or self-assessment account.
If you would like some advice relating to your property, contact Downs Solicitors to see how we can help.