If you are trying to sell your home, or might sell your property in the future, you need to know about the changes which have been made to capital gains tax (CGT).
In the Budget 2018, the tax free gains that you can make when selling a property were subject to scrutiny, with two important changes introduced which now restrict CGT relief for a person's main residence.
The gain relating to the time when the owner occupied a home as their main property is exempt due to the principle private residence (PPR) relief, and this was previously able to be extended in some circumstances. However, there have now been changes proposed by the government which restrict these extensions significantly. Let's look at the changes to two of the extensions:
Changes To The 'Last Few Months' Extension
One of the PPR relief extensions had been for cases in which a property owner moves out of a home before it is sold. If they leave before contracts for a sale have been arranged, the gain attributable to the period in which they were not living in the property would be subject to CGT. The PPR relief period is extended to 18 months to cover this final period of ownership, but the government proposed a change which will see the period slashed to nine months (it had originally been 36 months). It should be noted that the 36-month extension still applies for disabled people and those in residential care.
Changes To The Lettings Relief Extension
The other main changes which were proposed are in relation to lettings relief. Each owner could claim lettings relief which reduced CGT, covering gains of up to £40,000 on an owner's main home. This relief was subject to a capping, at the level of PPR relief due over the period that the owner occupied the property.
The government put forward a proposal to cut this lettings relief to cover only occupancy periods which relate to shared occupancy, i.e. the owner must have been sharing the property during that time. This change is likely to directly affect homeowners who have moved out and then started to let their former property.
Don't get caught out by the changes to the PPR extensions which can be applied to CGT. Trust David Howard as your go-to provider of tax services and planning. We are the tax accountant Surrey can rely on. Click here to get in touch.