Tax Payable on Sale of Private Residence

It has long been part of the capital gains tax exemptions/reliefs that no capital gains tax would be payable on the sale of a persons sole/main private residence. This principal private residence exemption also included the final 36 months of ownership as deemed occupation, and therefore also exempt from charge, up until a few years ago. This final period of deemed occupation was then reduced to 18 months.

From 6th April 2020 the final period exemption will be shortened further from the 18 months down to only 9 months ( although the 36 month exemption period will continue to be available to disabled persons or those in a care home ). In addition to this reduced period, lettings relief will only apply when the owner of the property is in shared occupancy with the tenant.

It becomes more possible therefore that a chargeable gain could arise where an individual has to sell their home, before they can buy a new one. Any capital gains tax on disposal would also need to be paid within 30 days of completion. A failure to disclose the tax due, and the failure to pay the tax by the due date, would potentially lead to additional penalty costs.

Anyone selling their principal private residence after 5th April 2020 should be conscious of these changes to the exemption.

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