Capital Gains Tax changes
Property taxes within the UK have seen several changes over the years. Whether this is Income Tax for residential property landlords, as a restriction to interest relief or changes to wear and tear allowance, Stamp Duty Land Tax (“SDLT”) for acquisitions of residential property by individuals and corporate entities or Capital Gains Tax (“CGT”). This overview summarises the recent CGT changes and those that have been pre-announced for the forthcoming years.
Companies are chargeable to Corporation Tax on their chargeable gains. The rules mentioned below, unless expressly mentioned, will include transactions made by such entities.
- Non-resident individuals who disposed of an interest in a UK residential property must complete a non-resident CGT return within 30 days of completing on the transaction. Three methods of calculations were introduced, and the taxpayer can decide which one they wish to adopt giving them the most effective outcome. It is possible to rebase the property to the value as of 5 April 2015 and only pay UK CGT from that point. These rules also apply to trusts and companies with slight modifications to the rules where appropriate.
- Non-resident individuals disposing of non-residential property will be subject to CGT and should be reported within 30 days of completion. This follows on from the changes in April 2015. It will be possible to rebase the relevant property interest to the value of this as of April 2019.
- Disposals of shares in property holding companies by non-UK resident individuals, where the seller (or related party) has had an interest of 25% or more in the company within the previous two years and where at the date of disposal of that interest, 75% or more of the gross assets of the company is UK land, will be subject to CGT. Previously, these disposals by non-UK resident individuals were not caught under the UK CGT rules. Individuals can rebase their shares in April 2019. Exemptions are available for companies holding such land and property for use in their trade such as care homes and hoteliers.
- Companies who own a qualifying interest in line with those mentioned above will be subject to Corporation Tax on their gain.
- Lettings relief will only be available for periods where the owner has lived in the property with the tenant. This will potentially result in individuals who have let out their homes having a higher CGT liability than they originally thought.
- Where an individual has at some point during ownership lived in the property as their home, they are entitled Private Residence Relief (PPR) on the last period of deemed occupation, even if they have not lived there. From 6 April 2020, the government has reduced this period from 18 months to 9 months. This will see the gain attributable to those additional 9 months subject to CGT.
- Sales of UK property will be reportable to HMRC within 30 days and any liability will need to be paid by then also. In the past, individuals under self-assessment could instead report the sale and pay across their liability through their Tax Return.
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