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January  2014

If you sell your home, you are not liable to pay any capital gains tax on any gain made as it is covered by 'Principal Private Residence (PPR) Relief' for the period that you have lived there.  If you sell a property, other than the one you live in, the sale will be subject to capital gains tax at 18%/28%, depending on whether you're a basic or higher rate tax payer.  However, if you have ever lived in this property you can claim PPR relief for the period that you lived in the property and the last three years, regardless of whether you have lived there or not.


Example

Mr X purchased a property in April 2000 as his first home, he later moves in with his girlfriend in 2005 and rents the property out, finally selling the property in 2012.  Although he made a capital gain of £70,000 he can claim PPR relief as follows:


April 2000 to 2005 - Period eligible for PPR relief

2005 to 2009 - Period not eligible for PPR relief

2011 to 2014 - Period eligible for PPR relief


Only six out of the fourteen years are chargeable, thus reducing the taxable capital gain to £30,000.

Current rules

“Upcoming changes to Principal Private Residence Rules”

If you have second property which you're thinking of selling in the near future, making the sale prior to the 5th April 2014 could make a significant difference to the amount of capital gains tax you pay.  HMRC guidance states that although you must exchange contracts before 5th April 2014 you have until 5th April 2015 to actually complete the sale.


As always, we are happy to help advise on these changes or explain them and relevant planning opportunities in further detail. If you are an existing client please speak to your regular contact.


If you are not a client and would like to arrange a free, non-obligation consultation on this or any other matter you feel that we may assist you on please call us on 01633 290745 or complete our contact form to arrange a visit.  To receive these newsletters direct to your inbox, please sign-up to our mailing list.

Advice

From April 2014, you are only eligible to claim PPR relief for the last 18 months, rather than 3 years.  Following on from the above example, and assuming Mr X sells the property on 6th April 2014, the taxable capital gain would now be £37,500.  Furthermore, this reduction will have a direct affect on any lettings relief that may be available.

New rules

HMRC have announced some changes which will limit the tax relief available for landlords.