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Insights // 13 January 2020

Changes in Capital Gains Tax (CGT) on Residential Properties from 6 April 2020

Partner Luke McMath, in our Residential Property team, looks at Capital Gains Tax (CGT) changes coming in 2020 and how they will affect residential property owners.

Three important alterations for Capital Gains Tax are coming in from 6 April 2020.

Prepayment of Capital Gains Tax on residential properties

For UK residents the current position is that if Capital Gains Tax would be payable in relation to a sale of a property then this would fall into the relevant tax year and the payment (if not offset by other losses) would not be due until dealt with under the normal self assessment regime.

The time for making this payment has been brought forward so that the tax payment must be made within 30 days of the disposition as a prepayment on account. Should there be subsequent losses then it will be a matter for the taxpayer to reclaim the Capital Gains Tax in due course through the self assessment system. This regime has already been applying to non-UK residents since 2015. This will accelerate receipt by the Revenue of this tax by as much as 21 months.

Reduction of the final period of ownership for principal private residence relief

The starting point is that CGT is potentially payable on the disposal of all residential properties. The main exemption to this rule is principal private residence relief which is intended to provide that no Capital Gains Tax would be payable in relation to the ownership and disposal of a taxpayer's main residence.

However, for a variety of reasons, it is not unusual that a taxpayer will continue to own the property after they have either moved house or otherwise ceased to occupy what was their main home. For many years for the purpose of calculating Capital Gains Tax, the taxpayer was allowed to add an additional three years onto their period of ownership and occupation of the property for the purposes of calculating whether any Capital Gains Tax was payable. This period was reduced to 18 months in 2014, but will be reduced further to 9 months from 6 April 2020. Existing reliefs, such as moving to a care home where the time limit remains 36 months, will remain.

Reductions in use of Letting relief

Currently if a property has at some stage been occupied as a home Letting relief is available of up to £40,000 per owner. From 6 April 2020 this will only apply to owners who have shared occupation with the tenants.

For further information or legal advice, please contact or call 0118 951 6800. 

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Luke McMath

Luke McMath


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