A consultation by HM Revenue & Customs (HMRC) on changes to capital gains tax (CGT) relief on your home has now closed. But what could be in store from April 2020?
Principal Private Residence (PPR) relief totally exempts your home from CGT if you live in it throughout your ownership.
There is also a final exempt period to cover a time when you may have moved to a new home but not sold your old home.
If you have let your home at some time during your ownership, a further exemption may be available to cover up to £40,000 (£80,000 for joint ownership) of gain when you sell it.
The now closed consultation contained the following proposals;
So, for disposals on or after 6 April 2020, only those periods where the owner is in shared occupancy with the tenant will qualify for lettings relief, and any periods for when that property was rented out before that date will no longer qualify.
Approximately 40,000 people a year sell properties which have been their home at some time. Assuming these proposals go ahead as planned from April 2020, it is anticipated that the additional tax paid as a result of these proposals could reach as much as £150m by 2023/24.
Use it or lose it - will these proposals affect you?
If it is likely that these changes could affect you, and you are thinking of selling a property sometime in the near future which has been your home, a measure of CGT relief may be lost unless it is used before 6 April 2020. So action may be required now, subject to commercial and family circumstances.
The proposals do not affect landlords who have never lived in the property they rented out.
Please contact your adviser at Bishop Fleming who will be able to advise you on how these changes could affect you, together with possible tax planning opportunities.