From 2019, Capital Gains Tax will be payable within 30 days on selling a house or flat you don’t live in – making it tricky for some to sell.
Stamp duty on houses “SDLT” is a tax that grates with a lot of people because it is ‘lumpy’ – you may not pay much over your lifetime but it has to be paid just at the moment in time when you are stretching yourself for the largest purchase most people will make. In a year’s time there is a further small wrinkle for the unwary – rather than 30 days grace period, SDLT must be paid within 14 days of a purchase.
However, as the vast majority of purchasers will be using a solicitor or licensed conveyancer to complete their purchase, and have a mortgage, they will be required to deposit the SDLT funds prior to completion. So where does this really impact?
The shorter deadline impacts most keenly on companies and other property investors which submit SDLT returns on purchases and leases in-house, and on solicitors and licensed conveyancers who do not have streamlined systems for SDLT returns.
What is the answer? Wherever possible to prepare the SDLT return ahead of completion of the transaction, or at the very least ensure you have considered what reliefs may be available.
Capital gains tax “CGT” on houses is not usually a concern for owner-occupiers selling up, as ‘Principal Private Residence Relief’ exempts the sale from tax. However it will apply to:
- People selling a house ‘bought to let’;
- ‘Inadvertent landlords’ who have let out a house for an extended period, after moving out;
- The sale of ‘furnished holiday let’ houses;
- Second home owners selling up; and
- Overseas investors in UK houses and flats.
With the exception of overseas investors, sellers have generally been able to pay CGT as late as the 31st January the year after the April to April tax year when they sold. We are promised that ‘from 2019’ (i.e. the tax year starting 6 April 2019) this grace period will be drastically reduced to 30 days from sale.
While it would be expected that sellers would generally be in a position to meet such tax at this point, this may not always be the case, as for example they may have higher borrowings to repay.
There are also technical issues coming out of this proposal around the use of capital losses, and the ability to reinvest proceeds of a business-related gain in a further property, deferring the capital gain.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.