Example Joe’s house in Luton is his principal private residence, which he has owned for eight years. Fed up with commuting he buys a flat in central London and elects for this to be hismain residence. Exactly five years later he sells his home in Luton. The Luton home is exempt for the first eight years whilst he was living in it and for the last ninemonths because, even though he had another home which was hismain residence during this time, the last nine months is always exempt provided the home in question qualified as themain residence at some point. 8.75/13 of the gain on the Luton home will be exempt fromCGT. Upon the eventual sale of the flat the whole of that gain will also be exempt.
Certain periods of absence from the property can be deemed to be periods of occupation and as such, can count towards the exemption from CGT. Prior to 6 April 2020 letting relief gave up to £40,000 (£80,000 for a couple who jointly own the property) to someone letting part or all of a property, which was their main residence or was their former main residence at some point in their period of ownership, throughout the period of the let. However, under the revised rules letting relief is only available where the owner and tenant share occupancy. More than one residence Where an individual (or married couple) has two or more residences, only one residence at any one time can be treated as the main home for exemption. This is done by an election. Provided a particular residence has been the main residence at some time, then generally the last nine months of ownership is exempt. This applies even if another residence has become the main residence during this time.
Any unused RNRBl rate band may be transferred to a surviving spouse or civil partner. Lifetime ISA The Lifetime ISA, provides a tax free savings account for those wanting to save for later life or for first time buyers wishing to save for a home. The Lifetime ISA can be opened by those aged between 18 and 40. Each person can save up to £4,000 each year up until the age of 50, and receive a government bonus of 25% (a bonus of up to £1,000 a year). The bonus is paid at the end of each tax year and savers can use some or all of the money to buy their first home. Help to Buy ISAs are no longer available to open, however, existing account holders can continue to save into them. The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point the purchase of their first home is completed. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings. Those with accounts can keep saving until 30 November 2029 when accounts will close to additional contributions. An individual must claim their bonus by 1 December 2030.
The main residence exemption can be complex. Please contact us for further advice before making
transactions in property. Inheritance tax (IHT)
The general growth in house prices has caused real IHT worries because retaining the family home in the estate when it is often the largest asset could result in an IHT liability of up to 40%. At the same time, finding a way to deal with it efficiently for IHT is difficult because individuals need a place to live. The Residential Nil Rate Band (RNRB) is an additional nil rate band which may be available where a residence is passed on death to direct descendants such as a child or a grandchild. This band is £175,000 in 2021/22. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.
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Property Matters
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