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What were the Capital Gains Tax changes in 2020?

We've updated this guide on 30th April 2021

If you sold a residential house or flat in the UK after April 2020, then you might not have known about some recent Capital Gains Tax (CGT) changes that were made by HMRC. If you’re unaware of the tax changes, then it’s important you’re aware of how they can affect you. You’ll also need to know what to do differently when reporting and paying CGT on residential  property. 

What is Capital Gains Tax?

Capital Gains Tax is a type of tax that you pay when you sell an asset for profit. This can include both residential and commercial property, as well as shares, cryptocurrency and more. You only have to pay CGT if the profit you make is above the Capital Gains Tax allowance. For the 2021/2022 tax year, this is £12,300. 

If the profit is over the CGT allowance, then you need to file a Self Assessment tax return. You do this to declare the profit and pay tax on it. Take a look at how much tax you could owe with our Capital Gains Tax calculator below:

Where did you get profits?
Profits from capital gains
£
Annual income
£
Outside of capital gains
Select tax year
Profits after tax
£18,560
CGT
£1,440
Profits from selling shares
£20,000
Capital Gains Tax (CGT)
£1,440

First £12,300 are tax-free.

£1,000 taxed at 10%: £100

£6,700 taxed at 20%: £1,340

Your profits after tax
£18,560

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How your capital gains tax is calculated

Your total capital gains tax (CGT) owed depends on two main components:

  1. How much you earn in total
  2. What type of assets you sell

Your overall earnings determine how much of your capital gains are taxed at 10% or 20%.
Our capital gains tax rates guide explains this in more detail.

In your case where capital gains from shares were £20,000 and your total annual earnings were £69,000:

Capital gains tax (CGT) breakdown

You pay no CGT on the first £12,300 that you make

You pay £100 at 10% tax rate for the next £1,000 of your capital gains

You pay £1,340 at 20% tax rate on the remaining £6,700 of your capital gains

What were the Capital Gains Tax changes?

The main changes that were made to Capital Gains Tax were regarding the deadlines for paying it after selling a residential property in the UK. 

Since 6th April 2020, if you’re a UK resident and sell a piece of residential property in the UK, you now have 30 days to let HMRC know and pay any tax that’s owed. If you don’t, HMRC can fine you, as well as adding additional interest to what you owe. 

These changes aren’t just limited to UK residents. It’s therefore important that everyone involved in the sale of a residential property fully understands them. This includes any non-UK residents that might be involved.

When might I need to report Capital Gains Tax within 30 days?

HMRC state that if you live in the UK, you might need to report and pay CGT within 30 days if you sell:

  • A property that you’ve not used as your main home
  • A holiday home
  • A property which you let out for people to live in
  • A property that you’ve inherited and have not used as your main home

This doesn’t apply to you if:

  • The legally binding contract for the sale was made before 6th April 2020
  • You’re eligible for full private residence relief
  • You sold the property to your spouse or civil partner
  • The profit you made was within your tax free allowance 
  • You sold the property for a loss
  • The property is outside the UK

What does this mean for non-UK residents?

Non-UK residents are advised to continue to report their sales or interests in UK property, regardless of whether there is a CGT liability within 30 days of completion. They can no longer defer their CGT payment via a Self Assessment tax return. Any tax you owe must be paid within this new 30-day reporting and payment period.

What about agents?

Any agents who act on behalf of a customer who sells or disposes of a residential property in the UK, will need to:

  1. Register with HMRC’s new agent service
  1. Ensure that any CGT liability due for your customer is reported and paid within the new 30 day limit

What if I’m a trustee?

If you’re a trustee who sells or disposes of UK residential property held in a UK resident trust then you must follow the new guidance the same way as UK resident individuals. You’ll also need to register the trust on HMRC’s Trust Registration Service to get a Unique Taxpayer Reference (UTR).

If your trustee sells or disposes of residential property or commercial property that’s held in a non-UK resident trust, then the same rules apply to CGT as they do with non-UK residents.

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