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Press comment:CGT rules hurt second home owners

11/07/2019

If you are covering Finance Bill 2019-20 and the changes to Capital Gains Tax Private Residence Relief , please see the following commentary from Quilter tax and financial planning expert, Gordon Andrews:

“Profits from the sale of property are exempt from Capital Gains Tax if it is your main home, meaning owner occupiers are not due to pay any tax if they sell the property for more than they bought it for.

“However, CGT might apply when you sell a property that isn’t your main residence, such as a holiday home or buy to let. The tax is a significant charge on the profits made from selling a second property, but some reliefs and exemptions apply. This includes private residence relief, which provides a reduction in tax if the individual originally lived in the property and then kept it as a rental after moving to a new home.

“Under the existing rules for residence relief, individuals can claim exemption from CGT for the time they spent living in the property, plus another 18 months of relief. But under the new rules, that will now reduce to the time spent living there, plus an extra 9 months. The change is small, but could mean affected individuals paying thousands of pounds in additional tax.

“The government expects to net an additional £470m over the next five years in additional tax revenues as a result of this change. It means that owning a second home becomes slightly less profitable for those that rent out a property they previously lived in. It is not uncommon for individuals to try and hold onto a flat, for example, when they move to a family home, in the hope that they can continue to hold it as a buy to let and eventually cash-in by selling the property and capturing a profit from rising house prices. These changes make that slightly less attractive.

“The rule changes do have some benefits for married couples. Where a spouse or civil partner inherits a second home on the death of their partner, the relief will now be transferable. They would previously have been entitled to no relief unless they have lived in the property themselves.”

For more information contact

Michael Glenister020 7778 963807469 144535michael.glenister@quilterinvestors.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.4 billion in investments (as at 30 June 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.