April 2014 will see changes to the rules surrounding Principal Private Residence (PPR) relief.
In the past, individuals who sold a property that had been their main or sole residence (PPR) would not pay capital gains tax on gains that accrued in the last 36 months of their ownership, even if they lived in another property during that time that qualified for relief as their main residence.
Essentially, this 36-month grace period was intended to benefit those who put their home up for sale, moved to a new property, but had difficulty selling the other property. This led to a practice (notably among MPs) called “flipping”, where individuals who owned more than one property could switch between their preferred PPR by notifying HMRC, thus benefiting from the 36-month exemption when they sold their second residence as well as having their ordinary main residence exemption.
When the new tax year comes in, this period is being halved to 18 months. This might act as a deterrent to the practice of “flipping” but is also a key indicator of how liquid the housing market currently is.
If you own multiple properties and need advice on how the changes to the Principal Private Residence could affect you, get in touch with Alexander & Co on 0161 832 4841.