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Changes To Capital Gains Tax On Residential Property

On 5th December 2013, the Chancellor George Osborne announced significant changes to capital gains tax (CGT) affecting second-home owners and overseas investors in UK property.

CHANGES TO PRIVATE RESIDENCE RELIEF

From 6th April 2014, an individual’s ‘final period exemption’ which applies to a property that has been a person’s private residence at some point in the past, will be halved from 3 years to 18 months. The reduced exemption period will mean that anyone selling a second-home (which has previously been their private residence) will face a higher tax bill. Where currently 3 years of CGT relief is available, from April 2014 only 18 months worth of uplift in the value of a second-home property can benefit from CGT relief. It is anticipated that HM Treasury will generate £360 million from the change by the 2018/19 tax year.

NON-RESIDENT INVESTORS TO LOSE CGT EXEMPTION

From April 2015, overseas investors who are not resident in the UK will face a CGT charge on future increases to the value of their UK property investments. Unlike UK citizens and residents, non-resident investors are currently able to keep the proceeds from sales of UK property tax-free. HM Treasury is to publish a consultation on how this change will be introduced in early 2014.

If you would like to obtain further information about these changes, please speak to Richard Monkcom, Head of Druces’ Private Client team.

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