A common misconception is that it is possible to sell your home and for that not to be fully exempt from capital gains tax. There are a number of circumstances where this may be the case. The Budget introduced the tightening of two common extensions to the relief which is likely to increase the number of sales of homes liable to capital gains tax, or where more tax will be due.

The legislation, as interpreted by any number of tax cases over the years, has led to a complex and clunky, albeit highly valuable, tax relief against the gains arising on the sale of a property that is or has been the only or main residence. The relief is essentially a time apportioned relief for periods of occupation of the property as a home, with a number of bolt on  periods where the property is deemed to have been occupied.

One such period has historically included the final period of ownership. This was introduced with capital gains tax in 1965 to cover bridging periods when moving home. In more recent times, up until April 2014 the final 36 months would be covered, it then reduced to 18 months. From April 2020 this will reduce to 9 months. However, the final 36 months will continue to qualify for the disabled and those in a care home.

Further, there is a relief for periods when all or part of the property has been let as residential accommodation which was introduced in the early 1980s to encourage job mobility. From April 2020 this will only apply when the owner is in occupation of the property along with the tenant. This is likely therefore to hit people who have moved out of their home into another property and have let the former property out – which was the original intention of the relief.

It is not yet clear how this change to letting relief will operate and whether it will still have much widespread application. The value of the relief has been restricted and so withering in real terms in any case. Despite this, it is still worth up to £11,200 in tax (£22,400 for jointly owned property). The need to keep careful records of periods of occupation and lettings will continue to be important.

The detail of the measure is subject to a consultation.

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