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Capital Gains Tax changes on residential property

05 April 2014

Changes that come into force on 6 April 2014, will halve the period of exemption from three years to 18 months for homeowners claiming Private Residence Relief to avoid paying Capital Gains Tax on the sale of residential property warns Adams & Remers.

People who may be in the process of selling a property that they no longer live in must exchange contracts to sell the property prior to 6 April 2014 and complete on the transaction before 6 April 2015 for the three year rule to still apply otherwise they will only receive an exemption for the last 18 months of ownership.

This may affect people who are trying to sell a property for a variety of reasons where the property has been lived in as a home but the owner has moved into a different property, perhaps on marriage. It may also affect couples who may have separated where one party has moved out of the house.

There is an exemption where a disposal sale is being made by a disabled person or an individual (or by their spouse or civil partner) who has been resident in a care home for at least three months.  In these circumstances the three-year exemption will continue to apply.

Couples who have separated however and where one or both partners have not been occupying the family home up to the point of the sale, the share of the property which belongs to the person no longer living there will benefit from only 18 months under the new rules not three years’ relief when the property is sold after the 6 April.

If you are likely to be affected by the change in the rules then you should take advice before 6 April. It may be possible to dispose of the property into an appropriately worded vehicle, which would crystallise the gain before 6 April to enable you to benefit from the full three-year period. It is worth noting that Capital Gains Tax can also be chargeable on the gift of a property and the disposal of a property out of a trust and the changes to the rules will apply to those disposals as well.


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