CGT Reliefs – Hit with Both Barrels!

12th November 2018

A gain on sale of residential property is chargeable to capital gains tax (CGT) as follows:

  • 18% to the extent that the gain falls within the basic rate band
  • 28% thereafter
  • An annual exemption is available if not utilised elsewhere (currently £11,700, rising to £12,000 in the 2019/20 tax year).

Principal Private Residence Relief (PPR) ensures that the gain relating to a period where the property is occupied by the owner is exempt from CGT.  Further periods of relief may be available, depending on the reason for the homeowner’s absence.

The recent 2018 budget targeted these current rules, with changes proposed from 6 April 2020.

Lettings Relief

The current rules allow for up to £40,000 of relief (£80,000 for a couple) if a property has been the owner’s main residence for a period and is then let, equating to up to £22,400 of tax saving in real cash terms.

However, the government is proposing to significantly tighten this relief, allowing a deduction only for periods where the owner and tenant are in shared occupancy – i.e. a period during which the owner should already be entitled to claim PPR relief anyway!

The Final Period

Currently PPR relief is extended for the final 18 months to cover the final period of ownership after the homeowner has vacated the property.

The proposal is to slash this final period to just nine months, which the Government state is ‘twice the length of an average property transaction’.

This change does not affect the relief available for those who move out of their homes and into residential care; the relief in this situation remains at 36 months.

A consultation period in respect of the above proposals will commence shortly, with changes due to come into effect from 6 April 2020. The Government’s rationales for changing the reliefs and further details can be found here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752071/PRR_web.pdf

 



 
Other items in Blogs
 
Lucy Bayliss
12th November 2019 Finance charges for landlords – The knock on effects

  Since 6 April 2017, changes are being gradually introduced to restrict the relief available to landlords in respect of their finance costs. Under the old rules, the interest element of the mortgage payments was 100% allowable for income tax purposes. However, this is gradually being replaced with a 20% tax reducer instead. The timetable…

Read More »

Barbara Nicholas
1st November 2019 Brexit halts Budget

With all the uncertainty over Brexit, we waited a long time to learn the date of Sajid Javid’s first Budget.   Finally we learnt this was to take place on 6th November, amid great excitement at muted suggestions about the possible abolition of Inheritance Tax and radical changes to stamp duty.   The bubble has…

Read More »

Vanessa Pearson
28th October 2019 Off-Payroll Worker Tax Rules: Be prepared!

Knowledge based contractors working in the private sector will hopefully now be well aware that, subject to any possible Government last minute change of heart, new tax rules are coming next April. For many, who are not currently following IR35 rules, this will mean a large increase in the tax they pay; perhaps tens of…

Read More »

Matilda Mawson
24th October 2019 I’ve got 99 Problems but my Tax Return isn’t 1!

There are now only 99 days before the tax return filing deadline of 31 January 2020. Do not delay – file it today! Not sure if you need to file a tax return? HMRC have a questionnaire that only takes a few minutes and will check whether any of your income or gains will require…

Read More »

Jeannette Hume
24th October 2019 R&D Tax Claims: HMRC finally go-digital.

In February 2019 HMRC introduced an online tool to submit Research & Development tax relief claims (both SME and RDEC claims). It is still necessary to make the claim on a company tax return (form CT600), but the accompanying detailed R&D project information can (but does not have to) now be submitted by completion of…

Read More »

Ruth Pearson
17th October 2019 Is it too early to talk about Christmas!

In December 2018 HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time. This was for a number of reasons, one of which could be due to businesses closing over the Christmas period and therefore having to pay staff earlier than normal.   HMRC have received feedback from…

Read More »