Draft legislation confirms a further tightening of the rules on capital gains tax and your home.
The government has been reforming the tax system to make investment in residential property less attractive. Actions have included increasing stamp duty land tax (mirrored in Scotland and Wales), reducing tax relief for mortgage interest and, from next tax year, creating a 30-day time limit for paying capital gains tax (CGT) on any residential property sale profits.
There will be two further new changes from April next year:
- A reduction in the 'final period exemption’. This is the period in which no CGT applies to a former main residence, and it will be halved to nine months in most circumstances. a problem if you buy your new home before selling your old one.
- Letting relief, which exempts up to £40,000 of gain from tax, will only be available if the owner remains in shared occupancy with the tenant. So, it won’t apply where the owner moves out.
The government’s explanatory note says that “These changes are intended to make private residence relief fairer and…better targets… reliefs at owner occupiers, in line with broader tax strategy to promote home ownership”.
If you are thinking of moving home but retaining your current property, both measures provide food for thought.
Shorts are here to help
Shorts' dedicated Private Client team can consider your situation and ensure you fully utilise exemptions, reliefs and any losses. It is important to seek advice with adequate time to review circumstances and implement any recommended planning before any transaction takes place.
Begin your journey with us today. Drop us a line and let's start talking about how we can save you tax.
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Dean Castledine
View my articlesTags: Private Client
