What are the new Capital Gains Tax Rules?

The capital gains tax rules are changing in April 2020, with the changes being described as ‘seismic’.

In this episode we take you through those changes, the impact they may have on you, and why you’ll need to be really careful not to get caught out!

Timing will be very important.

(Transcript below.)

Transcript:

Hi, and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.

Today I want to talk about something that has been declared a ‘seismic shift’ by people within our industry.

This week we’re looking at the new 30 day payment window for capital gains tax on property sales.

This comes into effect on the 6th of April 2020, and will primarily affect those who are selling second homes or properties with taxable gains.

If you’ve lived in your home for the whole period of ownership, it’s unlikely to affect you because something called private residence relief will apply, and that should mean that there’s no taxable gain on the sale. Obviously, you will need to check that, but that is primarily the distinction between whether this change in the regulations will affect you or not.

If you are affected, you will need to have your financial ducks in a row in good time before that sale goes through, because you will need to calculate, declare, and pay any tax that results within 30 days of the completion of that sale, so that’s a really tight window.

This contrasts with the current situation, which is that if you sell a property within the tax year, so between the sixth of April one year and the fifth of April the following, you don’t need to declare and pay that tax until 31st of January the following year.

So it’s a significant change, hence the fact that it’s been described as ‘a seismic shift’.

So what do you need to consider?

Well you need to make sure that you’ve got, as I said before, all your financial ducks in a row. That means that you need to have, to hand, quite a lot of information before that sale goes through so that you can actually get that declaration in within the very short window.

You need to have all the full details of your property that you’re selling. As a minimum you need to know:

  • how much you bought it for
  • when you bought it
  • the cost of any purchases or improvements that you’ve made during the period of ownership

That may require a professional evaluation, and obviously those things do take time. So you need to make sure that you’ve got all those sorted before the sale goes through.

What might be the sticking point?

You also need to have an estimate of your income over that period, that year, because the tax due will depend on that year’s income, being 18% or at 28%.

If you don’t know what your income is in that year, then you’ll struggle to estimate that tax and pay it in time.

Obviously, the complication is going to be if your income fluctuates dramatically, or if you’re selling more than one property. This could make it hard to know what level of income you’re going to get, so you do need to give that consideration.

It’s a big change, and there are going to be people that struggle with how that impacts them. If this is likely to impact you, or if you’re not sure, then please do get in touch. It’s what we’re here for. Get in touch, let us know what your situation is, and we’ll be able to talk you through the impact. We’ll help you to make sure that everything’s in place and that you don’t hit any penalties or interest charges.

So those are the new Capital Gains Tax rules, effective, as I say, on the 6th April, 2020.

I’ll leave you with that and I’ll see you all very soon.

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