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Are you selling residential properties this year?

There are proposed new changes to declare capital gain on residential property sold from April 2020.

These changes will be very massive and would affect individuals selling residential properties.

Who will be affected when selling residential properties?

People affected by these changes include individual taxpayers, not companies disposing of their:

  • Second Homes.
  • Overseas house and flat
  • Higgins style off-plan purchase plus subsequent sales
  • Taxpayers disposing of their homes where full principal property relief is not due
  • Taxpayers selling their houses do not qualify for full principal property relief or letting relief.

Selling residential property


Currently what happens when are you selling residential properties?

When an individual sells a house, it’s a chargeable event to capital gain tax.

What that means is that you will have to declare this on your self-assessment returns for the tax year the house was sold. The tax declaration and payment will also be due by the 31st of January after the end of the tax year the house is sold. Therefore giving enough time for the taxpayer to pay the tax due.

If the house was owned by more than one person they would have to declare this separately declaring their own share of profit.

What’s been declared or taxable when selling residential properties?

The main interest to HMRC is the profit from the sale of the house because it’s based on this profit that your tax is applicable one.

The profit is derived from sales proceeds deducted from the cost of sales such as agency fees accountants fees etc.

Also, the cost of purchasing the houses and other costs associated when buying.

Tax Relief can be claimed.

There are various tax reliefs that could be claimed by selling residential properties.

Principal property relief

 This relief is given to taxpayers that sell a property that is their main residence in the UK.

This relief can be 100% if the taxpayer has resided in the property all through the ownership.

They could also claim partly some of the periods lived in the house or some period that is exempted.

Letting relief

This relief can be claimed by taxpayers that sell the properties that they use as letting properties.

The main reason they can claim this relief is that that property has been used as their main residence at some point during their ownership.

This relief is based on the number of the month the property has been let however it would be the highest of the letting relief, the principal relief or a maximum of £40,000.

Annual exemption amount

 Every taxpayer can claim a certain amount as tax relief on capital disposal.

The annual allowance for 2019/20, relief is £12,000.

Changes to declaring Capital gain tax from April 2020 when selling residential properties.

From April 2020, individual taxpayers will have to declare their disposal in properties within 30 days of disposal and also pay the capital gain tax due.

This means for every disposal, there will be a capital gain tax return submission.

This would definitely increase their accountancy and administration costs.

However, the main changes are the tax that is due within 30 days which is a change in the way CGT is paid now.

Currently, CGT is not due until the 31st of January after the end of the tax year of disposing of the property.

Selling residential properties


The conclusion to selling residential property from April 2020

If there are plans to sell any of the properties mentioned above, it’s advisable to dispose of them before the new changes begin in April 2020.

If you would need more support and tax advice with regards to disposing of properties in an efficient way.

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