The Autumn Statement in December and the recent Budget in March both saw some important changes to the Capital Gains Tax (CGT) regime for UK residential property. Some of the changes affect principal private residence relief - the rule that exempts an individual from CGT on their main home; others affect non-UK resident individuals disposing of UK residential property. In short, property investors with UK residential property face tougher tax charges at home and away!
Changes At Home...
Principal private residence relief is crucially important to property investors who have previously used rental properties as their own home or who plan to do so before the property is sold.
A property which has been your main home at any point during your ownership is exempt from CGT for the period that it was your main residence and is also exempt for a final period of ownership immediately prior to sale. In addition to this, any property which has been your main home and has also been rented out attracts a further tax relief known as 'private letting relief'. This additional relief exempts a further part of your capital gain: generally, in most cases, the lower of the amount of principal private residence relief you are already entitled to, or a maximum limit of £40,000. The maximum limit applies on a 'per person' basis, meaning that a couple owning property jointly could benefit from up to £80,000 of additional relief.