Updated: 31st January 2020
New Capital Gains Tax (CGT) rules come into effect from 6th April 2020 and have the potential to increase your liability by a considerable margin if you are planning on selling a property that was once your main residence after this date.
Capital Gains Tax planning is crucial if you’re thinking of selling such a property - planning ahead for these changes could save you thousands of pounds. Julie Palmer, partner at RBR Advisory, discusses the upcoming amendments to the Capital Gains Tax regime, and explains what individuals can do to limit the financial impact of these changes.
New Capital Gains Tax rules 2020
The Finance Bill 2020 brings in changes not only related to the tax reliefs available, but also regarding the timing of CGT payments. From 6th April 2020, CGT rules will change as follows:
Private Residence Relief (PRR)
Previously, principal Private Residence Relief was available to homeowners for the full period of owner-occupation, plus 18 months after moving out of their main residence. This qualifying period has now been halved to just nine months.
It could affect you if you’re moving into a new home before selling your former residence, should that property fail to sell within nine months. The special rules for people moving from a main residence into full time care, or those with a disability, remain unchanged at 36 months, however.
Lettings relief of up to £40,000 was previously available to those renting out a former main residence, but after 6th April 2020 you must be living in the property during the entire rental period in order to qualify for lettings relief. This move means lettings relief is now heavily restricted, and only applies to those sharing the property with their tenant(s). Essentially, therefore, this can be seen as more of a ‘lodger’ relief than a straightforward lettings relief.