Your most popular property questions answered.
I HAVE SOLD A PROPERTY WHEN DO I NEED TO PAY MY CGT?
If you are a UK resident and you sell or dispose of a UK residential property which isn’t the house where you normally live, then there may be CGT to pay. If there is CGT to pay, then you must tell HMRC about the gain and pay any CGT due within 30 calendar days from the date of completion.
If you’re a non-UK resident you must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a gain or not. You need to do that within 30 calendar days and from 6 April 2020 you can no longer defer payment via your Self-Assessment return.
WILL I NEED TO PAY CGT ON THE SALE OF A PROPERTY ?
When you sell a property that you have never lived in, you will have to pay Capital Gains Tax (CGT) on any gain that you make. CGT is calculated as the difference between the price you paid and the price you sell the property for. You can also include the cost of any improvements that were made and the cost of buying and selling the property (i.e Agents fees, SDLT, legal fees). Every individual is entitled to an annual allowance for capital gains and you will only be taxed on the gain you make in excess of this. The current 2020/21 annual allowance for capital gains is £12,300 (2019/20 - £12,000). You will pay CGT on gains in excess of this at either 18% or 28%.
I AM MAKING A LOSS DO I NEED TO COMPLETE A TAX RETURN?
If you are earning between £2,500 - £9,999 after allowable expenses or £10,000 before allowable expenses you need to inform HMRC and complete a tax return. But what happens if you are making a loss?
You do not need to complete a tax return if you are making a loss, but are you certain that you are actually making a loss ?
Now that HMRC has made changes to how much mortgage interest you can claim, your actual income earned may not be the same as your taxable income earned. Mortgage interest is no longer an allowable expense, so your taxable income will be calculated as rental received less allowable expenses (not including interest paid).
It is important to make sure your calculations are correct to avoid paying fines due to errors on your return.
Even if you make a loss it is advisable to complete a return so that you can offset that loss against future profits you make.
CAN I STILL CLAIM LETTINGS RELIEF ?
Principle private residence relief (PPR) is available when you sell your main residence.
In previous tax years, if you had sold a house that had once been your PPR and was now rented, you were able to claim lettings relief. This further reduced the tax that was due. However this has changed with effect from the 2020/21 tax year.
From April 2020 the final period exemption has been decreased from 18 months to 9 months and lettings relief is now only available if you are in shared occupation with a tenant.
MY SPOUSE EARNS LESS THAN ME, CAN WE DECLARE ALL OF OUR JOINT RENTAL INCOME ON THEIR RETURN ?
If your spouse is a basic rate taxpayer (earns less than £50,000) but you are a higher or additional rate taxpayer, it is more tax efficient for the basic rate taxpayer to include all of the rental income on their tax return.
Unfortunately it is not as simple as that though!
When spouses / civil partners own a property jointly, they are deemed to earn that income equally ie 50:50, even if that is not actually the case.
If you wish to share the income in a different ratio you will need to provide proof to HMRC that the beneficial interest is shared in a different ratio to the legal interest. This can be done by notifying HMRC of the different ownership ratio and providing proof thereof.
This is a relatively simple procedure, but there are IHT as well as Income tax consequences so be sure to discuss this with your accountant in order to make sure you fully understand.
CAN I CLAIM TRAVEL EXPENSES FOR WORK ?
Commuting to work can be a very expensive business these days - between the cost of petrol and parking and train / bus fares it can swallow up a large amount of your monthly salary.
People often ask if they can claim this cost as a tax deductible expense ?
Unfortunately HMRC does not class regular commuting as an allowable expense. Any travel costs incurred between your home and a regular place of work are not allowable. The key point here is that disallowed expenses relate to a "regular place of work".
So when is your place of work not a regular place of work ?
Well any place of work that you attend for the purpose of performing a task of limited duration or for some other temporary purpose is a temporary workplace. Confused ? Well you're not alone!
Ultimately in order to be temporary workplace you should not go there for more than 24 months, and in addition you should not spend more than 40% of your time there.
If in doubt, speak to your accountant who will be able to clarify the issue for you.