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15th April 2020

New changes to the taxation of residential property

Over recent times the government has introduced several changes to the tax treatment of UK residential property.
Until 5 April 2020 capital gains on the disposal of UK residential property was reportable on the annual tax return which should be filed by 31 October following the tax year end if a paper return is filed or 31 January following the end of the tax year if an electronic tax return. The tax payable was also due to be paid by 31 January after the end of the tax year. With effect from 6 April 2020 new rules take effect requiring reporting and payment of Capital Gains Tax on residential property within thirty days of completion of the disposal. HMRC are introducing a new Residential Property Return form for the purpose. Estimated figures may be used for the new return if full details are not available in time. Those tax payers already in self- assessment will need to also include the details on their normal annual tax return, with corrected figures if appropriate. If the disposal is fully covered by principle private residence relief, a return will not be required.

With regard to principle private residence relief, the final eighteen months of ownership was deemed to qualify for private residence relief. This period is now reduced to nine months with effect from 6 April 2020. For those who are moving into long term care arrangements the final period for deemed occupation remains at 36 months.

Lettings relief of up to £40,000 may also be available if the property has been let and also qualified at some point for principal private residence relief. With effect from 6 April 2020 the relief will only be available where the tenant was in occupation at the same time as the owner.

Since 6 April 2017 tax relief for interest and finance costs incurred in connection with a residential property business has been restricted. The restriction has been phased in over four years and with effect from 6 April 2020 relief will only be given at the basic rate of tax of 20%.


For assistance in connection with personal or trust tax matters please contact Eric Wardle by clicking here.
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