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.