Has the Autumn Statement affected your residential investment?

Published December 12th, 2013

The Chancellor’s Autumn statement made a change in repect of Principal Private Residence Relief where a house is let after being owner occupied.

Where a house owner occupies their property but subsequently chooses to let it the Capital Growth for three years after it is let has been tax free.  The period has now been cut to 18 months.  This is most likely to affect people who are compelled to let their house for reasons of work or family changes, often where there is some uncertainty as to whether or not they will return.

Consequently those who let their own home need to consider more closely the implication of Capital Gains Tax on the sale.  In many cases there may be no tax payable as the gain is averaged over the time the property has been owned so the gain post letting may be small.  It is also possible that the gain is covered by the annual exception which may mean that no tax is payable at all.  It may be appropriate for some house owners to share ownership (i.e. between husband and wife) if this was not already the case, so as to ensure two annual exemptions are available.  Finally house owners are advised to retain details of works done in preparation for letting, particularly those which may be considered of a capital nature so that appropriate costs can be offset against the capital gain to further reduce the gain.

Presumably the government feel that by reducing the period of relief from three years to 18 months a large number of people will be affected and capital revenues increased.  Therefore great care must be exercised by those who fall into this category.