Tax bills rising for selling your home? Generally, if you sell your home it is free of capital gains tax because of private residence relief (PPR). But this may not always be the case?

Why?

Changes to the ownership period

In the 2018 Budget the final period of ownership has been reduced from 18 months to 9 months from April 2020.

For example, say you move out of your home and move into your new house but it takes longer than 9 months to sell your old house. Then there could be capital gains tax to pay!

Please be aware there are special rules if you are moving into a care home or have a disability

Changes to Letting Relief

Currently, if you let your home (PPR) out then there is an extra relief you can claim to reduce any capital gains tax you may have to pay when you sell it. This is called letting relief and you can claim up to a maximum of £40,000 relief if you qualify.

The 2018 Budget has attacked this relief and wants to withdraw it from April 2020 unless you occupy part of your home while you are letting it! Would you be happy having tenants in your home while you live there in order to qualify for this relief?

Tax Planning

So if you are considering selling your home be wary of the tax changes being introduced and make sure you do not fall foul of them or it could cost you some surprised tax bills. Remember, if you own the property jointly then there are effectively 2 lots of annual capital gains allowance that can be used which will reduce any tax liabilities accordingly.

Further Reading:

What Happens if you Forget to Declare the Rental Income?