For those people who own more than one property they are about to lose their tax breaks as announced in Osborne’s Autumn Statement.

The Government will cut the amount of “relief” on CGT (capital gains tax) that is presently allowed for those who sell their second homes.

 

This will be introduced in April next year and the new measure will mean that the “relief” will now only be applied to second properties being sold within eighteen months of purchase, rather than the original three year time period.

 

The government sees this very much at ensnaring landlords who have used this “allowance” solely to reduce tax liability. However it is also going to hit the “accidental” landlords that are homeowners, who after moving out of their family home have decided to rent them out and those who own holiday homes.

The tax at present is that if you have more than one property then your main “home” when sold, will not be burdened by capital gains, however all other properties that are sold will be liable for the tax.

 

You can inform the government, if after having acquired more than one property, that you wish to change a main residence but it must be done within two years of buying a property. This can be done as many times as you like so long as you stick to the scheduled time period and tell the HMRC.

The “relief” on CGT was introduced to help people who had to move home for a variety of reasons such as work commitments and were unable to sell their former property because of the economy at that time, so decided to rent them out.

MP’s have used the existing allowance by “switching” residences between their constituency home and London accommodation so that they would not have pay the tax when selling one of their properties. 

But the government feels that this has been widely abused by landlords when selling a secondary property by declaring it as their main residence and in some cases for no more than one month. This means that the property is exempt from CGT under the present three year “relief” period. Holiday home owners have also used this tactic.

Many experts say that the new measure will have major repercussions for those having to move out of their home because of separation or divorce and buy a new home; it will also affect those people who move because of employment reasons.

It is generally felt that the government could be cracking down too heavily on people whose living situations change.

Mike Warburton, tax director at Grant Thornton, said: “Let’s not forget this relief is primarily for people who genuinely need to move home but aren’t able to sell the house immediately and are forced into becoming accidental landlords. This relief gives them some breathing space,”

There could be a sudden rush of properties being put up for sale before April comes and Daniel Crowther, a partner at KPMG said “Whether this will cool the housing market will remain to be seen”.