Mr and Mrs Johnson (names changed), a couple from the North West, had recently sold a property they had previously lived in, prior to moving to London. They were advised that they had a taxable gain of around £100,000.
This meant that they would have had to pay a capital gains tax liability of up to £28,000.
They were taken aback by the amount and were looking for ways to reduce their tax liability.
Upon consulting with one of our tax experts, the Johnsons were made aware of a capital gains tax relief, which extends principal private residence relief when you are forced to move away from your home for work purposes.
This allows homeowners to claim relief on the gain from the sale of their home if they were obligated to move away for work.
Since the Johnsons’ move was job-related, they were eligible to claim this relief.
Their tax advisor helped them to calculate the relief they were entitled to, provided written advice, and submitted the claim to HMRC.
The application of the job-related accommodation relief resulted in a capital gains tax saving of £28,000.
This was a huge relief for the Johnsons, as they were able to reduce their tax liability completely and use the money to fund their new home and other expenses.
It is crucial to be aware that the CGT rules require that there was a time when the house was your only or main residence, unless prevented from re-occupying the house for work reasons.
Furthermore, in the case of absences due to employment as with this case, the relief will also apply if the absence is due to the employment of a spouse or civil partner.
Capital gains tax can be a significant expense for homeowners who have sold their property. However, it is essential to explore all the available tax reliefs and exemptions before filing your tax return.
The Johnsons’ case demonstrates that there may be an option available to you, dependent on your circumstances, that could mitigate a large tax bill.
In this particular case, the couple involved were able to benefit from the job-related accommodation relief, which helped them to save a substantial amount of money, after they were alerted to this opportunity by a member of Williamson & Croft’s specialist tax team.
Seeking advice from a qualified professional is essential, as they can guide you through the more complex tax laws and help you to make informed decisions about your finances.
Contact us today to find out how we could help you reduce your capital gains tax liability.