The Bright-Line Rule
- Written by
- Coralie Wedekind
The new government have been quick to start making changes based on their election promises, and one that came into effect late March getting people talking is the extension on the bright-line rule.
With this coming up in the media again, there’s the misconception out there that when you sell your family home you will now pay capital gains tax. In most cases this is not true and your family home falls out of the rules.
The bright-line rule was first introduced on 1st October 2015 which states that if you sell residential land within two years of owning it, you must pay tax on any profit made unless an exception applies. This was extended to five years on 29th March 2018.
The rule only applies to residential land. It does not apply to farmland or business premises.
However, you are exempt from the bright-line rule if:
- The property is your main home.
- You only have one main home; therefore if you live in two houses then you need to determine what home is your main home.
- You inherited the property. If you sell property that you inherited then the bright-line rule does not apply.
- The property is transferred under a relationship settlement agreement. The transfer is deemed to be treated as sold at the original cost. However, if the property is then sold within two years of the original acquisition date then any profit made could still be taxed under the bright-line rule.
Where you only own one home and you live in it, you are fine, but when you or your trust start to own more than one residential property you may be subject to these new rules. If you are in this situation you are best to talk to a business advisor about the implications of selling or buying more residential property. Strettons have experts within our team that are here to help you.
Coralie Wedekind prides herself in delivering maximum results and efficiency for her clients’ business.
Give her a call on 07 376 1700.