Q. If I sell a buy-to-let property in July 2020, when will I have to pay the capital gains tax (CGT) arising on the sale?
A. Finance Act 2019 made certain changes regarding payment of CGT, which take effect from April 2020 and broadly align the position of UK residents and non-UK residents.
Subject to certain exceptions, where there has been a disposal of a residential property, payment on account of the CGT will be due on the filing date for the return, which is generally within 30 days of the day after the date the property sale is completed.
The payment on account required is the amount of CGT notionally chargeable at the filing date. This is the tax that would be due if, under the normal rules for calculating chargeable gains for a tax year, the tax year ended at the time the disposal is completed.
In calculating the amount, any unused allowable losses for capital gains purposes incurred by the time the disposal is completed can be used. Available reliefs and the annual exempt amount are applied in the normal way.
The amount of CGT payable on the account is the amount after applying the applicable rate of tax to the net gain.
Since the 30-day payment window can make it difficult for some people to provide exact figures, HMRC allows for certain estimates and assumptions to be made. The taxpayer can correct once the exact figures are known. If the resulting amount is higher than the amount previously paid, the difference becomes payable to HMRC and interest may be due. If the amount is lower, the difference becomes repayable along with repayment interest from HMRC.
Q. I am thinking of transferring ownership of a rental property to my daughter to help reduce the value of my estate for inheritance tax (IHT) planning purpose. There will be no cash consideration given. What value is used for the gift and what are the CGT implications?
A. For CGT purposes, you are deemed to transfer to your daughter at current market value. So the difference between the market value and the price you originally paid for it will be your capital gain. You will be liable to pay CGT on the gain, even though you have not received any cash for it.
Note that different rules apply for stamp duty land tax (SDLT) – if you gift the property to your daughter for no consideration, there is no SDLT for her to pay.
Q. I work part-time and don’t earn enough to pay tax, but my husband earns £35,000 a year from his full-time job. I have been told that I can transfer some of my personal allowances to my husband so he can save some income tax. Is this true?
A.Claiming the marriage allowance can save married couples or civil partners up to £250 in 2019/20, but it is estimated that more than 2 million couples are missing out.
The allowance was introduced on 6 April 2015 and enables married couples or civil partners to transfer £1,250 of personal allowance (2019/20 rate) from one spouse or partner to the other, provided that the recipient does not pay tax at a rate higher than the basic rate.
To process a claim, HMRC will need the national insurance numbers for each spouse/civil partner. In addition, if the claim is made online or by phone, HMRC will have to check the identity of the person making the claim and will ask for information from the claimant such as the last four digits from bank accounts that any state benefits (such as pension or child benefit) are paid into or from bank accounts that pay interest. Alternatively, HMRC may ask for information from employment such as information contained on a P60 (the form given to all employees at the end of a tax year).
A claim may be backdated, which means a couple claiming before 5 April 2020 could receive up to £1,150.
Further information can be found at https://www.gov.uk/government/news/spoil-your-loved-one-with-hmrcs-valentines-day-cash-boost.