Private Residence Relief: Budget 2018

Dec 21, 2018
Stephen is one of the firm’s tax partners. He specialises in income tax, capital gains tax, corporation tax, inheritance tax, and stamp duty land tax. He also specialises in advising property and construction businesses.

Private Residence Relief: Budget 2018

Chancellor Phillip Hammond announced in his Autumn Budget 2018 that from April 2020, the rules surrounding private residence relief will be tightened.

Private Residence Relief (PRR) protects taxpayers from capital gains tax (CGT) when selling their main home.

There are sometimes situations where a gain may arise on a house if it was not the taxpayer’s main residence for the whole period of them owning it. In situations like this, an extra ancillary relief may apply.

From April 2020, the government will change two ancillary reliefs that provide relief on rented property and on gains made in the final period of ownership; regardless of whether they were occupying the residency or not.

Lettings Relief

Where properties have been let, each owner is able to claim a lettings relief to reduce the taxable capital gain. This relief currently covers gain of up to £40,000 per owner, but it is only available when the property has been the owner’s main home at some time.

However, from April 2020, the government has proposed to restrict lettings relief to cover only periods in which the owner is occupying the same property, also known as ‘in shared-occupancy’.  This means that people that are not using their home as their main residence will be no longer be entitled to private residence relief on CGT. Delivering the Budget, Phillip Hammond said: “CGT relief will only be permitted for landlords where they are sharing occupation of the property with a tenant.” Homeowners who also move and let out their former home will also be affected by this change in CGT relief.

Final Period Exemption

Final period exception currently means that people do not have to pay capital gains tax (CGT) on gains made in the final 18 months of ownership, even if they are not an owner-occupier during that period.

A long exemption period means that more relief can accumulate on two properties simultaneously.

However, from April 2020, the exemption will be reduced to nine months. Though, this is still twice the length of an average property transaction. The 36 months of exemption rule will not change for those that are in or moving into care homes, as well as people with a disability.



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Stephen Charles

Tax Partner, Sheffield