Tax year end planning: Residential property tax changes


Filed Under: Private Client

Planning tips for the tax year end.

Capital Gains Tax (CGT) for non-UK residents

As announced in the 2013 Autumn Statement, non-UK residents will, from 6 April 2015, be subject to CGT on UK residential property. This is a clear and distinct break from the past as non-UK residents have, mostly, been exempt from CGT in full.

There is very little detail at present but a consultation is expected during Spring 2014. It is anticipated, but not confirmed, that the tax charge will be on the increase in value since 6 April 2015.

Principal Private Residence Relief

It was also announced in the 2013 Autumn Statement that the final period of exemption from CGT for a property that is, or has been, an individual’s main home will be reduced from 36 months to 18 months.

This change will apply to sales that exchange and complete after 6 April 2014. Sales that are mid-process, i.e. exchanged before 6 April 2014 but not completed, will keep the 36 month exemption as long as the sale completes by 5 April 2015. This is a significant restriction to the previously generous exemption from CGT, though it still remains a helpful relief to plan for.

High value residential property

Since 1 April 2013, high value (over £2m as at 1 April 2012) UK residential property held by a non-natural person (most commonly a corporate entity) will be subject to an annual tax charge starting from £15,000 a year. Whilst certain reliefs are available these are very restrictive and, generally, not available where the property is occupied by the owner (of the corporate entity) or someone connected with the owner.

In the first year there was an extended deadline for submission of the annual return and payment of any tax due. In this second year, the annual return for the year to 31 March 2015 and any taxes payable are both due by 30 April 2014.

CGT is also chargeable on any increase in value since 6 April 2013 made by the owning entity, on disposal of properties caught by these rules. The tax is payable by the non-natural person at 28%.