Capital Gains Tax on residential property

Former Principal Private Residence

If you are considering selling a rental property which at some point has been your principal private residence, there are substantial changes coming in April 2020 to the tax reliefs available.

Currently, the capital gain for the whole period of ownership is time apportioned between the months when it was your home and the months when it was a let property and you are not charged capital gains tax on the home portion and up to an additional 18 months at the end.

In addition to this Private Residence Relief, there is currently also something called Lettings Relief of up to £40,000 available to reduce the CGT tax bill where a private home has also had a period of being let.

From 6 April 2020, the final period exemption is reduced from 18 months to 9 months and in most cases the Lettings Relief goes altogether.

This means that there is the potential to be charged tax on an additional £40,000 on a let property sale which takes place after 5 April 2020 rather than before, plus an additional 9 months of time apportioned gain.

So, if you are considering selling a rental property which partly qualifies for Private Residence Relief, you may want to do it sooner rather than later.

It is worth noting that for CGT purposes the date of sale is generally the date when contracts are exchanged not the date that the sale is completed.

Overseas matters

If you are non-resident or temporary non-resident, the sale of a residential property needs to be reported on a non-resident Capital Gains Tax return within 30 days of the property being conveyed. Late returns will incur late filing penalties. Please note this is in addition to reporting the disposal on your annual self-assessment tax return. The online non-resident form for reporting the disposal of UK residential property is very complicated and if you find yourself in the position of needing to file one, you will probably need specialist advice.