Year End Tax Planning Guide
When you sell your home, private residence relief (PRR) means that any gain is usually exempt from capital gains tax (CGT). But problems can arise, and we consider key areas of complexity below.
It is not uncommon for someone to own more than one property, perhaps because they regularly have to work away from 'home', or perhaps because they have a house in town and another in the country. PRR only applies to one residence. If there is more than one property being used as a residence, an election can be made nominating one as the main residence. Strict time limits apply.
Periods of absence can cause problems. You may still qualify for PRR even if there are periods of absence from your main residence, but the outcome depends on how long you are absent, and the reasons for absence. There are special provisions for people working elsewhere in the UK or abroad. Please ask us for further advice in this area.
If there has been a period in which a property has been the only or main residence, special rules apply to the final period of ownership. The final 18 months of ownership has hitherto automatically qualified for CGT exemption, even if the taxpayer was living elsewhere. If the property owner is disabled or in long term care, this period is extended so that the final 36 months qualifies. Budget 2018 announced that from April 2020, the final 18-month period will be cut to 9 months. The 36-month period for the disabled or those in care is retained.
Lettings relief has also been changed by Budget 2018. Historically it has been particularly valuable for those letting out what was previously a main residence - perhaps because conditions were unfavourable for sale - after the acquisition of a second property for use as a main residence. It is not available for a buy-to-let property, only a dwelling which has at some point qualified for PRR for the owner. From April 2020, it will only be available if the owner shares some period of occupancy with the tenant. We are happy to advise further.
If you have any questions relating to the sale or letting of property, we should be delighted to be of assistance.