Budget 2013 – Capital Gains Tax

There were no changes to capital gains tax rates in the Budget.

The capital gains tax (CGT) annual exempt amount will be £11,000 for 2014-15 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees is £5,500.

For capital gains above the annual exempt amount the CGT rate for basic and higher rate tax payers will remain at 18 and 28 per cent respectively.

Changes to Personal Private Residence (PPR) relief

Changes to PPR relief were announced in the Autumn Statement in December 2013.

Currently, when you sell a property that was your main residence, it is still exempt from tax for the last 36 months of ownership, so no CGT is payable if you sell it within three years of moving out.

For contracts exchanged on or after 6 April 2014, this period will be reduced to 18 months.

Comment: An example to explain:  In simple terms (there are other exemptions that could come in to play), if you lived in a property for 10 years, moved out and then sold the property three years later, no capital gains tax was due since the last three years were exempt.  Under the new rules, 18 months would be taxable, since only the last 18 months is would be exempt. So 1.5 years of the 13 years that you owned the property would be subject to CGT – ie you would pay CGT on 1.5/13 of the gain.

 

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