Plans to halve the capital gains tax exemption period for second homes could result in a flood of properties being sold back on to the market.
The CGT exemption applies to a property that has been a person’s private residence at some point, even though they may not be living in the property at the time they dispose of it and may be claiming private residence relief on another property.
Presently, people can let out their home for a period of three years before they are eligible to pay CGT on any proceeds generated by selling the property.
But in the Autumn Statement last week, the Government announced the exemption would be reduced to 18 months from 6 April.
KPMG partner Daniel Crowther says: “Essentially what has been announced reduces the incentive to flip a house – that is to buy a property, use it as a principal private residence and continue to benefit from the CGT exemption for the next three years.”
He says the move could result in a flood of properties being sold back on to the market before the changes are implemented.
Crowther adds: “Affected owners may well be tempted to try to sell up before this measure bites so we could see a rush of properties coming to the market in the next four months.”
Coreco managing director Andrew Montlake says: “Certain commentators have been saying for some time buy-to-let is taking properties away from first-time buyers. This is one of the first moves by politicians to actually do something to address the issue.”
The Chancellor also announced in the Autumn Statement that foreign investors who do not reside in the UK will have to pay CGT on future gains on UK residential properties from April 2015.