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Thinking of moving house and selling a property?

Are you looking to sell a buy-to-let property or have you moved out of your main residence before the sale has completed? Please read and watch out for important changes to capital gains tax now in force.

Those of you with buy to let will already know there may be capital gains tax to pay on sale, based on the increase in value of the property over the period of ownership.   The tax due won’t change, but there are significant changes to how it is reported and paid.

The reporting:

Rather than reporting on your self-assessment tax return for the year in question (so potentially up to 22 months post-completion), you must submit an online report within 30 days of completion.  You’ll need a government gateway ID to do this.

The payment:

You have 30 days post-completion to pay the tax, you can’t just bank the profit and use elsewhere for a period. 

That’s a really tight turnaround, and you’ll only be able to comply with this if you have good quality, timely records in place and plan accordingly before completion.  It’s not just the differential between the purchase and sale price, the calculation would take into consideration expenses associated with the purchase and sale (legal fees, estate agents etc) plus any specific capital improvement made during ownership (for example, an extension build).

Even with the best of records, you may still need to estimate the tax, as if you have a variable income stream you may not know how much of the gain fits into the basic rate band (taxed at 18%) and how much above (taxed at 28%).

It’s not just buy to let though…

Where a property has been your main residence but you’ve moved out before the sale completes, maybe because the chain broke, you must complete the sale within 9 months of moving out or may be liable for tax on any gain after that period.  With the recent pause in the housing market this may start to be an issue from a timeliness perspective, although there may be some argument in the short term that prices may reduce over the coming months.  Don’t just cross your fingers and hope, let’s get a plan together.

I hope that gives food for thought, if this situation is approaching, we can help you through the process give your dave@blusky.co.uk or your relationship manager a shout.

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