Private residence relief (also called main residence relief) is well known. It prevents a liability from capital gains tax arising on any gain on the disposal of a property which has been the taxpayer’s only or main residence throughout the period of ownership.
Where a property has not been the only or main residence throughout, the amount of private residence relief is reduced. It is available both for the period during which the property was the taxpayer’s only or main residence and, currently, the final 18 months of ownership (the ‘final period exemption’). Where the property has been let, the chargeable gain may be further reduced by lettings relief (but note this is to be curtailed).
The final period exemption is a useful exemption. It shelters the again in the final period of ownership as long as the property has at some point during the period of ownership been the taxpayer’s only or main residence. It prevents a gain from arising if, for example, the taxpayer moves into a new home before the sale of the former home has completed. It also reduces the chargeable gain in respect of a let property that at some time has been the only or main residence. It is also a useful planning tool where a taxpayer has more than one residence.
The final period exemption
The final period exemption currently applies to the last 18 months of ownership. This is increased to 36 months where the taxpayer moves into care or is disabled. However, at the time of the 2018
Planning ahead – 6th April 2020
As the change does not come into effect until 6 April 2020, there is time to plan ahead. If a disposal is on the cards and the property has been the only or main residence at some point, but not throughout, the period of ownership, disposing of the property before that date shelters the last 18 months of ownership. Assuming that the legislation follows the same format as for the reduction in the final period exemption from 36 months to 18 months with effect from 6 April 2014, the critical date will be the date on which contracts are exchanged, which must be before 6 April 2020.
Deborah purchased a house on 1 November 2014. Until 31 October
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