Tax payment date
For disposals of residential property made after 6 April 2020 a separate Capital Gains Tax return and payment (if applicable) is due within 30 days. This means that CGT could be payable before the tax year has finished. Individuals will need to estimate their other income for the year to decide whether they will owe 18% or 28% tax, or a combination of the two. The disposal will also be reported on the tax return for the relevant year, so that a disposal on 31 May 2020 will go on your 2020/21 Tax Return. If any further CGT is owed this will be payable on 31 January 2022. If CGT was originally overestimated this will be credited back to you when the personal tax return has been filed. SEEK ADVICE: Capital gains tax can be very complicated. It is advisable to seek professional advice before you sell a property. This avoids any nasty surprises and allows time to take any measures that may reduce the potential tax liability.
Inheritance Tax
A furnished or unfurnished property is treated as part of your estate for inheritance tax purposes. Residential property does not qualify for any special inheritance tax relief. Ownership of property can be varied by deed of trust, but care is required in changes of ownership as they could be regarded as disposals for CGT purposes. SEEK ADVICE: Let property should always be considered in any inheritance tax planning. Owning a let property probably means that you should carry out some inheritance tax planning.
STAMP DUTY LAND TAX
Additional Stamp Duty Land Tax (SDLT) of 3% is payable when you purchase a property to let out unless it will be the only property that you own. The SDLT bands do not change for such purposes, but the additional cost needs to be considered when you are considering investing in a property to let out. The base cost for CGT will include any SDLT paid on the purchase price. SEEK ADVICE: If you are unsure whether the extra SDLT will be payable on your proposed purchase you should seek professional advice. Tell HM Revenue and Customs as soon as you have purchased your let property. Keep records of all income and expenditure, including mortgage statements. Keep a record of any capital improvements or major works to the property. If you intend to claim PPR relief for living in the property for a period make sure that you can demonstrate this residence was ‘real’ as HMRC can challenge this. Ask if your letting agent provides an annual statement – this saves time in putting the figures together at the end of year. Prepare a summary statement of income and expenditure on your rental properties made up to 5 April each year. Consider the ownership of the property – is it how you want it? Always seek professional advice before you make a decision relating to your let property. Action points • • • • • • • •
this guide has been produced by:
35 CHEQUERS COURT BROWN STREET, SALISBURY SP1 2AS Telephone: 01722 336647 Email: hugh@hugh-davies.co.uk Email: shirley@hugh-davies.co.uk www.hugh-davies.co.uk
DISCLAIMER The content of this guide is based on tax legislation in operation at the time of publication, which may change. Whilst every care has been taken in its production this information is for general guidance only. Specific professional advice should always be obtained based on personal circumstances. Hugh Davies & Co accepts no responsibility whatsoever for any action undertaken or refrained from as a result of the information contained herein.
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