Island knowledge, national expertise

CGT Net Tightens for Homeowners

The recent Budget contained an announcement that will be unwelcome news for some property owners.

The sale of a person's principal private residence has always received favourable treatment for Capital Gains Tax (CGT) purposes. Normally such sales are exempt from CGT.

The relief has traditionally extended to properties which have been the main residence of the owner for only a part of the period of ownership. In such cases, the gain on the sale of the property is apportioned on a time basis between the period it was used as the main residence (exempt from CGT) and the period it was not so used. In addition, the last 18 months of ownership are currently exempted if the property was let…this is a practical step as many people who have to move for work end up owning two houses at a time and letting one until it can be sold.

The relief has been subject to a limit of £40,000 of the gain during the period when it was let.

Two significant changes have been announced, which take effect from April 2020. The first is that the 'final period exemption' has been halved to the last nine months of ownership.

Secondly, the relief will only be available where the owner of the property sold has been in shared occupancy with a tenant, thus in effect abolishing the relief in the majority of instances.

This is the latest of a number of tax changes which have impacted negatively on the residential property market.

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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.