Q This is an awfully privileged question and I’m sure many will view my situation with glee. I am an “accidental” landlord. In order to be chain free when buying a home with my husband, I decided not to sell my small flat which I have rented out for the past few years.
I put the flat on the market in January with a view to selling before the end of the tax year to avoid the huge rise in capital gains tax that I will have to pay when the allowance disappears. However, due to the government clampdown on transactions I have now missed the deadline to exchange before 6 April. Everything was ready but, quite fairly, the buyer wanted to wait as per government advice. (My property is empty as my tenants moved out to make way for the buyer.) So I am now stuck with the mortgage to pay, the council tax and a bigger tax bill if the sale eventually goes through.
Added to that, the property I live in is a building site due to works stopping midway through a project – again due to Covid-19.
Will the government perhaps delay the new 2020 tax rules as a result of this? The penalties I am facing are due to their advice to stop transactions.
HM
A To answer your last question first: it doesn’t look like it. HM Revenue & Customs (HMRC) appears to have been focusing its efforts on providing financial support for those affected by coronavirus (Covid-19), setting up a phone helpline* to support businesses and self-employed people concerned about not being able to pay their tax bills because of Covid-19 and suspending regulations in order to fast-track supplies of PPE to NHS staff. The most recent HMRC communication about the capital gains tax (CGT) changes was a press release on 13 March 2020 (so pre-lockdown) which urged property owners to get ready for the new 30-day deadline for paying CGT on gains from a property sale.
This means that from 6 April 2020, if you are a UK resident and sell a property on which CGT is due, you’ll have 30 days in which to fill in a “UK land return” and pay any tax due. Failure to do so will result in a £100 penalty with a further penalty of the higher of 5% of the tax due and £300, if you are more than six months late. In addition, from 6 April 2020, lettings relief – which I think is the disappearing allowance you are referring to – will be available only to people who let their former homes to tenants they also lived with. Previously, lettings relief was available who let a former home but didn’t live with the tenants. Lettings relief has never been available to buy-to-let investors who never lived in a property let to tenants. What won’t disappear – for people who let a former home – is private residence relief. As in past tax years, this makes part of the any gain on the sale of a former home tax free. You work out how much by taking the number of months you actually lived in the property and adding nine then dividing by the number of months you owned the property. Also on the plus side is that, from 6 April 2020, the annual exempt amount for CGT has gone up, meaning that the first £12,300 of your total gains is tax free.
Finally, there has not been a “government clampdown on transactions”. Moving house is not illegal. It’s just that the government would rather that you didn’t if you possibly can.
* 0800 024 1222 8am to 4pm Monday to Friday (excluding bank holidays)
