Many buy-to-let landlords aren’t aware of the new Capital Gains Tax (CGT) rules which will apply from April 2020. Are you? Your lack of knowledge could get very expensive because of the fines and penalties which will be charged.
Put simply, the new rules dramatically reduce the time you are allowed to submit a Capital Gains Tax return and, more importantly, pay any tax due. The rules apply to the sale of any residential property where Capital Gains Tax applies. This is primarily aimed at buy-to-let landlords selling their property. A lot are doing so to escape the restricted relief on mortgage interest. Note that the rules will apply in cases where a landlord is selling to a Ltd company in an attempt to escape the reduction in mortgage interest relief.
From April, if you sell a residential property which is subject to CGT you will be required to submit a CGT return to HMRC – and pay any tax due – within 30 days of completion. You then have to include this information on a final tax return to be submitted by the usual due date.
From the Which website:
Currently, the sale (and the tax due) is included on a normal self-assessment return. Under the old rules, you could sell a property in April 2020 but this wouldn’t have to be reported until January 2022. The drastic change is that the new rules mean that you must report such a sale – and pay the tax due – within 30 days. That is sometime in May 2020 – potentially 20 months sooner.
It can be argued that you’ve had the money so should pay the tax – which is valid. However, one of the problems we frequently come across is the need to collate the information. Sometimes the full information required is not readily available, particularly if the property was purchased some time ago. Having the correct information can save thousands of £££s in tax.
We recommend that you start putting the information together as soon as your property goes on the market. There have been situations where documents have to be obtained from a solicitor which has ceased trading. They will be somewhere in an archive but tracking them down can be difficult and time consuming.
We are here to help you. It’s probably best to contact us (01509 816150) before you put your property on the market – but, even if you’ve left it to the last minute, we’ll do our best.