Reliefs available to homeowners to minimise your tax bill on sale

An individual’s main home is exempt from capital gains tax (CGT) on any profit (sale price being greater than purchase price) made on its sale. As a general rule a property can only be classified as your main home while you actually live in it.

However, there are certain reliefs available for individuals who sell their main home and during the period of ownership did not reside in it. Some of these are summarised below.

Periods of absence

Relief is provided for certain periods of absence from your main home meaning the portion of absence will not give rise to any capital gains tax bill. The exceptions for absence are as follows;

• You can be absent for up to 3 years, continuously or for several shorter periods for any reason
• You can be absent for any period during which you are employed in a full time job outside the UK
• You can be absent for up to 4 years if your place of work makes this necessary

For the above exceptions to apply the property must have been your main residence both before and after the period of absence and during the period of absence you must not have had another main residence.

Job Related Accommodation

This is a different relief to the above and shouldn’t be confused with bullets 2 and 3 above. The relief is aimed at catering for an individual who is compelled to live in accommodation due to his/her job. As an example a premises manager who has to live on site as part of his job would qualify. This individual would be permitted to have a residence elsewhere as his main home even if s/he has never lived in it. Any gain on sale would be exempt from tax.

Last 9 month rule (currently 18 month till April 2020)

This rule was previously far more generous at 36 months! If a residence was an individual’s main home at any time during ownership then the last 18 months are deemed to be your main residence regardless of whether the individual actually lived there. The rules are set to change from April 2020 to include the final 9 months only. It is therefore advisable for anybody looking to sell their buy to let to bring forward the sale to before the change of rules in April next year.

It is important will any aspect of tax planning to get specific advice for your circumstances so please contact us to find out more.

AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.