The sale of your home is not always exempt from capital gains tax.
There are many quirks to the capital gains tax rules and we would recommend always contacting us for a quick chat if you are selling a property – or any other investment asset – even if it has been your home.
In particular, if you leave the old home before it is sold, you may lose some of the exemption if it is not sold within 9 months of moving out.*
However, there is an exemption that gives you extra relief at the beginning of your home ownership. Where there is a delay in moving into a property due to construction of the building, renovations, or a delay in selling your previous residence, that delay can be a deemed period of occupation where it doesn’t exceed 24 months.
If you are in this position it may be better to stay in the old home as long as possible and take advantage of the 24 month period for the new home, rather than move and be subject to the paltry 9 month period for the old home.
Of course, there may be reasons why this is not possible, and it is necessary to move to the new home; or perhaps the family will live between the two homes. In this instance there is a third form of tax planning available, which is the use of an election as to which home will the main home for the purposes of capital gains tax.
Please contact us if you are in the process of moving home and if you anticipate any problems with the timing of the transactions.
*It should be noted that this 9 month period is extended to 36 months if the person moves to a care home due to age or disability.