Budget 2020 analysis: Capital Gains Tax

MHA Moore and Smalley tax specialists have made an analysis of the statements made by Chancellor Rishi Sunak in his first budget on 12 March 2020. In this blog we review the announcements related to capital gains tax.

The only change to capital gains tax (CGT) for individuals, with the exception to the changes to Entrepreneurs’ Relief, announced in this budget was the increase in the annual exemption from £12,000 to £12,300.

However, the Government has previously announced a number of changes which come into effect from 6 April 2020 in relation to reliefs that can be claimed when residential properties are sold.

The two main changes taking effect from 6 April 2020 are:

  1. The final period exemption for principal private residence (PPR) relief is to be reduced from 18 months to 9 months; and
  2. Lettings relief will be restricted to situations where the owner was in shared occupation with the tenant.

Also, from April 2020 all UK residents must report disposals of UK residential properties to HM Revenue and Customs and also make a payment on account for the CGT due, within 30 days of completion.

The changes do not apply where the gain made is not chargeable to CGT such as where the property has been the individuals only/main residence for the entire period of ownership and therefore covered by the principal private residence relief.  The rules also only apply to residential property currently.

The new rules being brought in are therefore going to mainly affect UK residents with second homes or landlords looking to sell their residential property lets.

Within 30 days of completion UK residents must

  • Calculate the gain made on the property (using estimates if necessary)
  • Report the gain to HM Revenue and Customs (HMRC)
  • Make a payment of CGT to HMRC

For advice on the Budget 2020 announcement, please contact a member of our tax team