Press release: Disappointment at smaller window to sell your home

The ATT is disappointed that the Government is pressing ahead with a change which will increase costs for home owners who are struggling to sell their property and have to move out before they can sell.

Draft legislation has been published today¹ which includes a provision to restrict the availability of private residence relief (PRR)² for home owners by cutting the final exemption period from 18 months to nine months from 6 April 2020.

The Government considers that this will better target reliefs at home owners, presumably by counteracting a perceived exploitation of the rules where individuals with more than one home can receive a final exemption period on both properties.

However, the ATT considers that the changes will have a wider impact and will affect individuals who are simply struggling to sell their home. The ATT set out its concerns in response to a consultation on the proposal earlier this year.³

Jon Stride, Co-Chair of the ATT’s Technical Steering Group, said:

“The purpose of the final period of exemption is to allow individuals a period of grace in which to sell their main home without incurring Capital Gains Tax even if they have to leave the property before exchanging on a sale.

“While in the majority of cases people are only able to purchase their next home when their current property has been sold, there are a number of circumstances such as separation, relocation for work, family or health reasons which may force an individual to move out of their home before they are able to sell.

“Given the current economic uncertainty, the reduction to nine months from April 2020 could hit taxpayers who need to relocate while they are still struggling to sell their original home. It is difficult to imagine that a nine-month period is sufficient time, or that April 2020 is an appropriate time to introduce any reduction.”

The shortening of the final period is also due to occur at the same time as letting relief will be restricted (another measure confirmed today) and that further, existing rules will take effect which will require UK resident individuals who sell any residential property where CGT arises to both report the disposal and make a payment on account of the tax within 30 days of completion.

Jon Stride said:

“The reduction of the final exemption period to nine months will increase the probability of a home owner incurring CGT on disposal. The requirements from 6 April 2020 to report the disposal and pay any CGT within 30 days of completion will require the home owner to be in a position to report and pay that CGT very quickly. Homeowners need to be aware of the changes from April 2020 as if they fail to report and pay the tax promptly they could be subject to penalties.”

Notes for editors

1. Private residence relief (PRR) exempts gains made on property from capital gains tax (CGT) for the period(s) that the property was (or is deemed to have been) the individual’s only or main residence. If a property has been an individual’s only or main residence at any point during their ownership, they are entitled under current rules to PRR for the last 18 months whether or not they occupy the property in that time.