The property market is braced for change as the stamp duty holiday ends, with normal rates returning on 1 October 2021.
Chancellor Rishi Sunak introduced the tax break on stamp duty in July 2020. He aimed to boost the housing market that had ground to a halt during the first lockdown. A stamp duty holiday was offered on the first £500,000 of the purchase price of a property in England or Northern Ireland. This break was reduced from 1st July 2021 to involve residential properties bought for up to £250,000. (The previous threshold was £125,000, or £300,000 for first time buyers.)
It did its job!
The stamp duty holiday contributed to a rise in house prices and increased activity within the housing market. The increase in property prices (13% during the last year) impacts upon the Capital Gains Tax that some owners incur.
Will your property sale incur Capital Gains Tax?
Firstly, be reassured that Private Residence Relief means you do not pay Capital Gains Tax on the sale of your home if:
- you have one home and you’ve lived in it as your main home for all the time you’ve owned it.
- you have not let part of it out – this does not include having a lodger.
- you have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
- the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total.
- you did not buy it just to make a gain.
The sale of investment properties, buy-to-let investments and second homes may incur Capital Gains Tax liability. This also applies to the sale of inherited properties.
Reducing Capital Gains Tax Liability
Improvement works to a usable property can be offset against Capital Gains Tax, which is calculated using the market value of the property. If you have Capital Gains Tax to pay, this must be reported and paid within 30 days of the sale of your property.
“Many people report and pay Capital Gains Tax when they complete their next Self Assessment Tax Return,” explains Emily Bridges of re:accounts. “We can help minimise how much Capital Gains Tax you owe and ensure that records are submitted on time.”
Are you thinking of selling a property which isn’t your main home?
Are you a property investor and want to ensure that you’re claiming all the tax relief you’re entitled to?
Talk to the team at re:accounts. We love a natter about numbers!