20th October, 2022, Kayleigh Wilson
Kayleigh Wilson, Tax Specialist at Stephenson Smart Chartered Accountants and Business Advisors, talks through the ongoing changes to Capital Gains Tax (CGT) and the areas to be aware of.
Capital Gains Tax
Capital Gains Tax is a tax on the profit made after a sale of an asset (i.e a property) that’s increased in value.
The gain you make is the part that is taxed, not the amount of money you receive.
If you sold a UK residential property on or after April 6, 2020, and you have a Capital Gains Tax liability, you must report and pay the tax due online using a CGT on UK property account.
Depending on the asset, you may be able to reduce any tax you pay by claiming a relief.
Principal Private Residence Relief
There’s been lots of changes since 2020, particularly with the rules of principal private residence (PPR) relief.
In a nutshell, when a person sells their only or main residence the gain is exempt from Capital Gains Tax due to PPR.
It may apply to all or part of a gain on a property and for most taxpayers, any gain made on the sale of their home will be completely exempt as it will be covered by PPR relief.
The charge may arise though if the taxpayer has been absent from the property during their ownership, or if they own more than one residence.
Lettings relief can only be applied where the residence qualifies for PPR relief – it must have been a person’s main or only home at some point. It’s given after PPR relief, where part of the gain remains chargeable due to residential letting during a period of absence.
Since 2020, lettings relief is available only if there is shared occupancy, the owner and the tenant both live in the residence at the same time, it is just this period of joint occupancy that qualifies for lettings relief. Lettings that occurred prior to 6 April 2020 that would have qualified for lettings relief under the pre-6 April 2020 rules is not banked.
It’s also worth noting that penalties are being issued by HMRC for the late filing of Capital Gains Tax returns on the sale of UK residential property, whether or not you are a UK resident. Depending on the date of the disposal, you now have either 30 or 60 days from the date of completion, to submit your CGT Return online.
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