Time is running out for a large number of landlords who might have to sell their properties quickly to avoid having to pay Capital Gains Tax (CGT).
Towards the end of last year, the Chancellor George Osborne announced a change in the rules on CGT. He said that he would be cutting the time that an owner who no longer lives in their last home can hang on to it before incurring CGT. Therefore on 6th April 2014, this time period will be reduced from three years to 18 months.
The three-year exemption period was introduced during the worst of the economic downturn and was introduced as a ‘bridge’ to help people move between two homes. Now that the market has picked up in much of the UK, the Chancellor clearly thinks that 18 months is enough time to sell a home.
However, this change could have serious financial implications for many landlords who are now renting out their previous homes. From April 6 onwards, if they still own but have not lived in their former home for 18 months, they will be hit with a tax bill – even if they sell their home on that day.
It means that a number of property owners will only have until 6th April to sell up and avoid the tax altogether. It also means that those who might have been planning to rent out their home for a while rather than sell might have to rethink their plans.
It’s important to add that Capital Gains Tax is complicated, and Walton & Allen advise that house vendors and landlords who may be affected by this new legislation should seek their own tax advice as soon as possible – ideally after the new draft regulations are published.