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Capital Gains Tax on homes - read the small print!

As you know there are a number of taxes that are paid by an individual during their lifetime. One of these is Capital Gains Tax. This is a tax on profit made on investments ie stocks and shares or property.

There have been some changes recently in relation to the treatment of capital gains and properties. A capital gain can arise when a property is sold or given away. The technical term for this is a disposal. A disposal will typically be where the property is sold by the owner, but it also applies where a property is inherited and then disposed of, or where a property is gifted. Capital Gains Tax applies to all properties which are considered to be investments ie

•a property that someone has not used as their main home

•a holiday home

•a property which they let out for people to live in

•a property that they’ve inherited and have not used as their main home

Capital Gains Tax does not apply to any property we are occupying as our main home.

The recent changes in Capital Gains Tax legislation meant that property owners selling a residential property in the UK, from 6 April 2020, will have 30 days to tell HMRC of the sale and pay any money owed in relation to Capital Gains Tax. For some this will be able to be done without having to register for Self Assessment.

There is no need to report a sale of a property in the following circumstances:-

•a legally binding contract for the sale was made before 6 April 2020

•the property meets the criteria for full Private Residence Relief (your main home)

•the gift was made to a spouse or civil partner

•the gains (including any other chargeable residential property gains in the same tax year) is within your tax free allowance (called the Annual Exempt Amount)

•the property was sold for a loss

•the property is outside the UK

HMRC will launch a new online service to make it easier to report and pay any Capital Gains Tax.

Sarah Kelsey, Deputy Director, HMRC, said:

“We want to help customers know exactly what they need to do, as it’s really important that everyone involved with the sale of a residential property fully understands the changes.

“People don’t usually have to pay Capital Gains Tax if they sell the house they live in, but this is a significant change for customers who do have to pay the tax and who up to this point would include the gain in their Self Assessment return. There will be lots of help and guidance available to individuals and agents, or those representing trusts, and we are providing a new online service to make it easier for all our customers to both notify and pay online within 30 days”

If customers don’t tell HMRC about any Capital Gains Tax within 30 days of completion, they may be sent a penalty as well as having to pay interest on what they owe.

Further advice and guidance is available on GOV.UK.

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