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Autumn Budget changes to Capital Gains Tax

06 November 2018

On 29 October 2018, Philip Hammond announced changes to Capital Gains Tax (“CGT”) in his Autumn Budget.

The key changes are set out below:-

1. Annual Exempt Amount

In line with inflation, the CGT annual exempt amount is increasing to £12,000 for individuals and personal representatives and £6,000 for trustees of settlements for the period of 2019-2020.

Ross Brown
Ross Brown, Partner

Victoria Kerr
Victoria Kerr, Trainee

2. Shortening of the period of application of PPR relief

PPR relief exempts a gain on the sale of a main residence from CGT. As we are aware, the relief will be reduced due to periods of absence but as a result of unpredictability in the housing market, there is an exempt final period of ownership. In the past, this final period was 36 months, which was reduced in 2015 to 18 months, and has now, as a result of this year’s Autumn Budget, been even further reduced to only 9 months as of April 2020. The reduction may be regarded as problematic for people who are struggling to sell property in current market conditions but need to move or relocate for work, family or other personal reasons. It must be noted that the final period will not change from 36 months for disabled persons or those in a care home.

3. Lettings relief

If PPR is available for a property, Lettings relief is available to people who may have received income at some time from renting out their main home. The relief prevents the proportion of the gain relating to the period when the property was rented out from being taxed. Currently up to £40,000 of a gain can qualify for Lettings relief. From April 2020, Lettings relief will only be available if the landlord was still living in the property and the renter was a lodger (a more uncommon scenario than that where the landlord had moved out). As PPR relief is still available if a homeowner has a lodger, Lettings relief is therefore will be almost redundant following this change. This will affect people using Airbnb and have an impact on the small time buy-to-let industry. Indeed, the PPR and Lettings relief changes follow recent moves which may in fact deter people from keeping property as an investment. If people are currently renting out their former home and are considering selling the property in the near future, they will need to think about how the changes will affect their tax position and any other tax planning opportunities available.

4. Entrepreneurs’ relief

Two important changes have been made to Entrepreneurs’ relief. This relief reduces the CGT rate to 10% on a disposal of business assets, and is only available if qualifying conditions are met. The first change, as announced in the Budget, from 6 April 2019, is that the period during which the qualifying conditions must be met will be increased from 1 year to 2 years. In addition, a disposal of company shares by a person must be those of the individual’s ‘personal company’ to qualify for Entrepreneurs’ relief and therefore from 29 October 2018 onwards, an individual must not only be entitled to at least 5% of the ordinary share capital and voting rights, but also have a 5% interest in the distributable profits and the net assets of the company. The changes to Entrepreneurs’ relief are designed to target its misuse and help “genuine entrepreneurs”, but will also cause a decrease in the number of individuals who are able to qualify.


Ross Brown Partner E: T. 0141 221 8012

Victoria Kerr, Trainee E: T. 0131 222 2939


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