In the recent Autumn Statement the Chancellor announced changes to the CGT allowance on a second home which may affect many property owners and landlords in the UK
What are the current rules in regard to CGT and property?
- currently there is no CGT payable on a property designated as your principle private residence
- if you own more than one property you can elect which property is classed as your principle private residence, but this must be done within two years of purchasing the second or subsequent properties
- for a property to be classed as your principle private residence there must be some evidence that you actually resided in the property, even for just a few weeks
- if you elect for a second property to be be treated as your principle private residence then this property, when it is sold, will be exempt from CGT for gains in the last three years of ownership
What are the changes announced in the Autumn Statement?
- all current rules will remain the same with the exception of the period allowed for exempt gains
- under new rules the period of exempt gains will reduce from three years to eighteen months
- this change will be implemented from April 2014
These changes could bring forward the sale of second properties as owners try to maximise their tax-free gains prior to the changes in April.