The Family Home - Capital Gains Tax (CGT) Update

There are big tax legislative changes planned and proposed to the capital gains position when individuals sell their family home.

Additionally, there have recently been some important capital gains tax cases which will impact heavily on disposals of the family home in the future.

The most valuable CGT exemption is the CGT private residence relief when taxpayers sell their family home.

In very general terms there is no CGT payable on a domestic property which has been used as the main family residence throughout the period of ownership.

If a homeowner has lived away from their home for part of their period of ownership, specific CGT tax legislation applies.

Currently the last 18 months of ownership are treated as if the homeowner had actually lived in the property so long as he has occupied it as his main home during part of his period of ownership.

From 6th April 2020 the government proposes to reduce the final exempt period from 18 months to 9 months.

Lettings Relief

Homeowners that have let out all or part of their home may not be able to benefit from the full CGT private residence relief, but they possibly could benefit from CGT lettings relief.

The CGT lettings relief available is the lower of:

• £40,000;
• The amount of the private residence relief due; or
• The amount of the gain that the taxpayer has made on the let part of the property

From 6th April 2020 the government proposes to reform CGT lettings relief in order that it only applies where the homeowner is in shared occupancy with its tenant.

2020/21: CGT Pay and File on the Sale of Domestic Property, where CGT is payable

• From 6^th April 2020, most clients (except companies) that sell a house or flat on which CGT is due, will have to ‘pay and file’ within 30 days of completion.

• They will have to pay the CGT on the disposal of the house or flat within 30 days from completion of sale