Only 30-Day Reporting and Tax Payment Deadline – Selling UK Properties from April 2020
Since 06 April 2020, both UK residents and non-UK residents have a 30-day capital gains filing and tax payment deadline if there is a sale/disposal of a residential property, which also includes gifts of properties. An individual return must be completed per disposal, in addition to the annual self assessment tax return, increasing the compliance burden for taxpayers.
Within 30 days, the capital gain on the disposal must be calculated, taking into account any available reliefs and losses. In addition, the capital gains tax (CGT) payable must also be approximated based on the expected tax bracket. The CGT rates for residential properties remains at 18% for basic-rate taxpayers and 28% for higher and additional rate taxpayers.
There are exemptions for the filing requirement, some of which are detailed below:
• If an individual sells their main home, which has been occupied since its purchase, this will generally be covered by private resident relief.
• If the disposal is at no gain/ no loss and there is no tax due or the disposal is exempt.
• The new legislations will mainly impact those with second homes or rental properties in the UK.
• When calculating the gains, the 2020/21 annual capital gains tax allowance of GBP 12,300 can also be taken into account.
• Furthermore, HMRC have confirmed there will be late-filing penalties and interest charges on any underpaid tax.
Capital Gains Tax (CGT) for Non Resident Individuals on UK Residential Property
Since 06 April 2015, non-UK residents who sell a UK residential property are still subject to UK Capital Gains Tax and disposal must be reported within 30 days of completion.
If the property was owned prior to 06 April 2015, unlike regular CGT calculations, there are three possible methods which can be used to calculate the capital gains, with the ability to choose the most beneficial method:
1. Calculating the gain based on market value as at 06 April 2015 and actual property sale price.
2. Time apportionment: Calculating the total gain from purchase to sale and time apportioning the chargeable gain for the period from 06 April 2015 to sale date.
3. If the land or property was sold for less than it cost, it is possible to calculate the loss over the whole period of ownership, but the way in which the losses can be utilised are restricted.
If the individual had previously lived in the property as their main home, private residence relief may apply to options 1 and 2.
In cases where the property was purchased after 06 April 2015, the whole gain is chargeable.
More Changes to Non-Resident CGT on Properties
Since 06 April 2019, non-UK residents are now also subject to capital gains tax on the disposal of UK land and property that is not residential property.
Similar to NRCGT for residential properties, if the land/property was owned prior to 06 April 2019, the individual is only subject to tax on the portion of the gain that accrued from 06 April 2019 to the sale date. However, for non residential properties, there are only two options to calculate the gain and there is no option to use the time apportionment method.
1. Calculating the gain based on market value as at 06 April 2019 and actual property sale price.
2. If the land or property was sold for less than it cost, it is possible to calculate the loss over the whole period of ownership, but the way in which the losses can be utilised are restricted.
The Changes Continue: New Stamp Duty Land Tax (SDLT) Surcharge Just for Non-Residents
From 01 April 2021, non-UK resident individuals purchasing residential properties in England or Northern Ireland will be subject to an additional 2% SDLT surcharge in comparison to UK residents purchasing a property.
However, residency for SDLT purpose will not be based on the statutory residency test but on a simpler 183-day test. If the purchaser was resident in the UK for 183 days in any continuous 365-day period before or after completion of the transaction, they will be regarded as UK resident and hence not subject to this surcharge. In addition, if you become resident post completion, it is possible to request a refund of the 2% surcharge paid.
Temporary Reduced SDLT Rates for Residential Properties
Individuals may wish to take advantage of the SDLT exemption until 31 March 2021, with a potential savings of up to GBP 15,000 in SDLT. For property purchases from 08 July 2020 to 31 March 2021, there has been a temporary reduction of the SDLT rate to 0% for residential properties up to GBP 500,000. Non-residential individuals who purchase a property after 01 April 2021 could potentially pay up to GBP 25,000 SDLT, in comparison to buying prior to 31 March 2021, due to the additional 2% surcharge and cessation of the temporary reduction. Please note, the 3% surcharge for additional properties will continue to apply throughout