The fourth in this series of articles looking at some of the more strange aspects of the tax system considers what seems like the somewhat arbitrary period that a homeowner has to their property after they have bought a new home elsewhere.
You have precisely nine months after the purchase of a new home before the sale of your previous one attracts capital gains tax (CGT). Even though the housing market has been pretty good for some time, people need this flexibility when they move because sometimes it can take a long time to sell the old house. At times, this can take ages (as in years), so the application of CGT compounds the problem, just at a time when you are probably spending money to do up your new house…
Previously, we were allowed up three years, which better reflected the practical problems people can encounter. The reason this was changed was… wait for it, because of the MPs’ expenses scandal in 2009. When the Daily Telegraph lifted the lid on some of our MPs more egregious behaviour, one of the things they uncovered was the way MPs were using the three-year rule to gain CGT relief on both their London and constituency homes. So, if you’re moving into the tenth month of not being able to sell your old house, and facing the imposition of CGT as a result, take it up with your MP!
Vivian Linstrom, M&S Accountancy and Taxation