Capital gains tax property pitfall

Capital gains tax (CGT) does not affect the sale of a main residence if you live there throughout all your time of ownership. But the reality of property ownership is not always this simple, and imminent change to the rules brings more points to watch.

Change to the rules on 'final period exemption' will bring higher numbers of property transactions within the scope of CGT. This relief helps those buying a new property intended as a main residence, when delay affects the sale of the original main residence. Currently exemption is given for the last 18 months of ownership, regardless of whether the owner lives there, if, at some point during ownership, the property was occupied as the main residence.

From 6 April 2020, the period is cut to nine months. This is expected to widen the CGT net considerably. We recommend that from 6 April, anyone buying a new main residence before sale of a previous main residence, needs to consider the CGT consequences of failure to sell within the nine-month window.

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