This was supposed to be a fund-raising Budget with tax increases to pay for the NHS and Universal Credit and so on. Instead, there were lots of give-aways, admittedly mostly small amounts, but nevertheless adding up to £103 billion over six years – writes Nick Edgley – Tax Manager, Ensors Chartered Accountants.

The big headlines focus on the increased personal allowance and higher 40 per cent tax threshold. However, there are a few other announcements which may have slipped past unnoticed and which could have an unexpected impact.

It is well known that any profit arising on the sale of a main residence is usually exempt from CGT. Sometimes, the sale of one residence is delayed, so people will end up owning more than one house at once (and probably having an expensive bridging loan at the same time).

It is only possible to have one main residence at any point, so if there is an overlap in ownership, there is a potential for CGT to be incurred. 

To ensure that where two residences were owned at the same time due to a delay in selling, in earlier years the final 36 months of ownership of the second residence was ignored, but this period was reduced to 18 months in April 2014 and is now due to go down even further to nine months from April 2020.  

The Treasury says that this is twice the length of an average property transaction, but with a slowing property market this nine-month ‘breathing space’ might be too short for many.

Also, there is a little known additional allowance which can reduce capital gains by up to £40,000 per owner, where they sell a property which has been at some time their main residence, but which has also been let out to tenants. 

This relief is now being restricted to cover only those periods where the property was being lived in by the owner and the tenant together, although we do not yet have any detail of the exact requirements. Again, this will apply from April 2020 onwards.

With the other restrictions for tax relief which now apply to landlords, such as the gradual removal of higher rate tax relief on mortgage interest and higher stamp duty charges, some landlords might think quite carefully about whether they really want to hold on to residential property.  

Indeed, the helpful advice provided in the Budget documents says that the time between now and April 2020 “will give people sufficient time to re-arrange their affairs (i.e. by selling their property) under the current rules should they wish to do so”. 

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