Tax update: Are you a homeowner?

Published: Friday 22 November 2019

Earlier this year we issued a release on the upcoming changes to available reliefs when disposing of your main residence.  As we edge closer to the commencement date, you may wish to think about acting sooner rather than later if you are planning on selling up.

Principal private residence (PPR) relief is available to shelter capital gains tax (CGT) arising on the disposal of a property which has been your only or main 
residence. Where there have been periods of absence from the property other reliefs may be available.

As a quick recap, from April 2020:

  • Lettings relief is currently available for the period that the property has been let sheltering gains of up to £80,000 for a couple.  From April next year, this will only be available where the owner is in shared occupancy with the tenant, effectively abolishing lettings relief and increasing a couple’s tax liability by up to £22,400.
  • The final period exemption will be reduced from 18 months to 9 months.  
  • A transfer of a property to a spouse after this date will always result in the receiving spouse inheriting their spouse’s PPR history.  Currently, the receiving spouse only inherits the prior ownership period for PPR relief where it is their main residence at the time of the transfer.

In addition, any CGT due on the disposal of a residential property will be payable within 30 days  of the sale. This could mean CGT being due up to 20 months earlier than is currently the case. Complications could also occur where there are multiple disposals during the same tax year and/or if you are uncertain of your likely income for the year and hence determining whether tax should be paid at the basic or higher rate (18% or 28%).

We can advise on the reliefs available, calculating potential CGT liabilities and/or assessing the impact of the new rules.

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Nick Haines
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