Capital Gains Tax

Capital Gains Tax (CGT) is paid on the profit when you sell or ‘dispose of’ an asset that has increased in value.

Most people are aware that when they sell their main residence no CGT is due because the gain is covered by the Principal Private Residence (PPR) relief. But the rules are different if it is your second home, you are a landlord or you are living abroad, as you will normally need to pay CGT on any gain.

Until recently, landlords and investors had up to 22 months from the disposal of a property to declare it on their self-assessment return and pay the tax due.

However, since April 2020, taxpayers have just 30 days to file a CGT return and to make an advance payment where CGT is due.

The various reliefs and allowances that apply to CGT on residential property mean that making this calculation and submitting the payment is quite an onerous task, so taxpayers will need to begin preparations for CGT before the completion of the transaction.

Lettings relief on residential properties which have been let but which were once the owner’s main home are severely restricted from 6 April 2020. From 6 April 2020 lettings relief will only be included in the CGT calculation where the owner of the property was in shared occupation with the tenant. This comes at a considerable tax cost to many since the current potential tax relief is as much as £11,200 per individual who has not been in occupation at the same time as the tenant.

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