Tax Forum :: Free Tax Advice

I have a flat bought in 1982 which was my main residence for almost 20 years. I moved out in 2001 and it has been variously tenanted and empty since that time. I saw in the last Budget that the Chancellor is considering changes to the various reliefs which would increase the tax bill from Apr 2020. I was planning to retire at end March 2020 and sell the flat at my leisure after that as, in retirement, I would be a basic rate taxpayer rather than higher rate as at present and would therefore pay the CGT liability at 18% rather than 28%. However, given the announcement, if these changes come to pass, should I both sell the flat ahead of the April 2020 deadline but also bring forward my retirement date to ensure I am a basic rate taxpayer in good time? Would it be possible to take retirement, say in February 2020 and still benefit from the current tax breaks but also the lower CGT rate of 18% or do I have to be a basic rate taxpayer for a prescribed length of time before the sale? I see that the Chancellor's proposal is going to consultation but I have no idea if that makes if more or less likely that the changes will come to pass. Any thoughts/guidance most welcome. Thanks!

No sign that the changes have been or will be abandoned. No apparent consultation as yet but the Govt is a little busy at the moment on the subject that will not be mentioned. It is always possible that the idea will be dropped if the Govt (or maybe just the Chancellor) changes but otherwise I would expect it to run its course.

The only way to work out your best strategy is to run the numbers for each possibility but bear in mind that:

- lettings relief is limited to £40,000 of gain in total
- tax is calculated on a tax year basis so if you are a higher rate taxpayer in Feb 2020, you will still be a higher rate taxpayer on 5 April 2020. 6 April 2020 would be new tax year and (if your income drops substantially), your marginal tax rate will drop.
- the first £11,700 of gain is tax free. After that, you add gains to your income for the tax year to work out your applicable rate. It is therefore possible to pay 18% on part and 28% on the excess over the higher rate threshold.

Thanks for the reply and sorry for delay in acknowledging. This is the first time I've been exposed to any CGT considerations but I thought once the taxable gain (after allowances etc) has been quantified that the whole amount would be subject to either 18% or 28%. Am I interpreting your reply correctly in that potentially both could apply? If so, how would that work? Many thanks.

Nope, otherwise somebody with £20k income could pay 18% on a £1m gain.

The normal higher rate threshold applies. Net gains are added to income as the top slice so the part up to the higher rate threshold is 18%, the part after is 28%.