Increased CGT on Sale of Previous Main Residence

The government has continued its tougher stance on landlords in the last Autumn budget. They have recently announced the removal of ‘letting relief’ and also a reduction in the deemed occupancy period allowable under Principle Private Residence (PPR) relief from April 2020. The main result of this change will be that if you sell a property you may have to pay more Capital Gains Tax (CGT).

In the Autumn Budget it was announced that there would be a change in the final exemption period for PPR to reduce it from 18 months to 9 months.

The second proposed change involves second home owners who rent their property following a period of occupation before they decide to sell and were therefore entitled to ‘letting relief’. Currently letting relief is the lower of:

  1. 1. PPR relief amount
  2. 2. The net gain remaining
  3. 3. £40,000

From April 2020, it is proposed that letting relief will only apply where the owner is sharing occupancy of the home with the tenant under the same roof. This will lead to increased CGT if you sell a home you once lived in with PPR.

Example Scenario

The original base cost was £50,000 in October 2002, value now £320,000 and it was used by me and my family as a home from purchase until October 2013.

The difference in the capital gain arising is significant at £58,103 and this is charged at 18/28%.

The tax, if sold after April 2020, is increased by over £16,000 and if you are considering selling such a property it is important that this is reviewed as soon as possible.