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Property
Capital Gains Tax Relief
Because of the need to take the cost of inflation into account, the Indexation system was used in the past. Basically this system, which was introduced in March 1982, allowed the cost of your assets or investments to be increased on a yearly basis in line with the retail price index, thereby reducing the value of capital gains made by investors and consequently, the amount of capital gains tax to be paid. However, the law changed on 6 April 1998 and 'Taper relief' was instituted. The indexation system still applies to property owned between March 1982 and 6 April 1998.
Taper relief is a capital gains tax relief system which allows for a deduction to be made from the capital gain earned on the investment. The size of this deduction depends on how long the investment has been owned and whether it is considered to be a business asset or a non-business asset. For the purposes of capital gains tax UK on residential property, such an investment will always be deemed to be a non-business asset. Non-business assets only attract gain reductions of 5% after three years, up to a maximum of 40% after ten years, so the longer you hold onto your property for, the less long term capital gains tax you're going to be liable for.
Main residence capital gain property tax exemption.
If you own a single residence and live in it, such a property will be viewed by real estate capital gains tax laws be your main residence and as such, gains made on the disposal of the property will, subject to certain conditions, be exempt from capital gains tax. Of course you can own more than one residence, but only one of these may, at any one time, be your main residence. You may however, elect which of your properties is your main residence as it is conceivable that you might sell a property and move into another, changing that residence's status. Married couples are only entitled to one main residence exemption and may only occupy two main residences if they have been separated in terms of a court order.
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