Private residence relief


Selling your home – private residence relief slashed

The Chancellor used the 2018 Budget to raise some extra capital gains tax from certain individuals when they sell their home. Could this include you when you move your childcare business.

Selling tax free

As you probably know, if you make a gain from selling your home it’s exempt from capital gains tax (CGT) because of private residence relief (PRR). Even you haven’t used a property as your home for extended periods, for example if you live elsewhere because of your job, PRR can still apply. In addition, the last 18 months of ownership are always CGT free, regardless of whether you occupy the property or not. This means you could move into a new home before selling the old one without losing any PRR. However, the 2018 Budget included two important changes to the PRR rules.

First change – ownership period

The 2018 Budget reduces the PRR for the final period of ownership to nine months (instead of 18) with effect from April 2020. This means if you buy a new home, move out and the property doesn’t sell within nine months you could face a CGT bill when you do finally find a buyer.

Annual exemption

If you lose some or all of your PRR and this results in a capital gain a CGT bill won’t always follow. Your annual CGT exemption, £12,000 from 6 April 2019 (if you haven’t used it against other gains) reduces the taxable amount. If there are joint owners they can also use their annual exemption to reduce the tax on their share of the gain.

Second change – letting relief

Currently, if you let your home PRR includes a bonus in the shape of an extra relief which can reduce the taxable amount of any capital gain you make from selling your home by up to a maximum of £40,000. The Chancellor has decided that this letting relief is to be withdrawn from April 2020 unless you occupy part of your home or share it while letting it.

Check your circumstances

The once simple PRR is becoming more complicated year-on-year. If you’ve occupied a house as your main residence for a while, but you’ve also lived somewhere else, the Budget raises the chance of a CGT bill. In future when you sell your home you’ll need to consider the CGT position if you’ve been absent from your home for one or more extended periods during your ownership.

While some absences are ignored, this might only apply if you re-occupy your home after the absence.

CGT changes in the pipeline

In an obvious attack on landlords, although it may affect others, the Chancellor confirmed that from April 2020 anyone who makes a capital gain from selling residential property which is not covered by an exemption or relief will have to declare and pay an estimate of the CGT within the following 30 days.

From 6 April 2020, if you move home and it takes longer than nine months to sell your old one, part of any gain you make when you sell will be liable to capital gains tax (CGT). Plus, the CGT exemption of up to £40,000 which applies if you rent out your home will be scrapped unless you occupy your home while it’s let.

Pension auto enrolment key dates for implementation

Many small business owners now use a pension scheme for eligible employees. We operate the government scheme NEST for our childcare clients with their monthly payroll commitments.

Any small childcare business that started trading between April 2012 and September 2017 will have implementation dates ranging from 1st May 2017 to 1st February 2018. Those starting out in business  from October 2017 onwards must implement auto enrolment immediately.

Please contact us if you wish us to implement your pension provision.


Is the Childcare sector ready for auto enrolment – are you ready?

Many small childcare business owners may be worrying  about the imminent introduction of auto enrolment.

The Pension Regulator has started sending out letters to employers who have at least one member of staff and must automatically enrol those who are eligible into a workplace pension scheme. The staging date for business owners with fewer than 30 staff is between the 1st April 2016 and the 1st April 2017.

To manage the employer responsibilities the employees are allocated into categories. All eligible workers, that is employees who earn over £10,000 per annum or £833 per month are automatically enrolled into the pension scheme.  The employee may wish to opt out and inform the employer and  pension provider but the employee must be opted in first.

The other categories which you may be unfamiliar with  are entitled worker and non eligible jobholder and they also have the right to join the pension scheme. These categories  are below the trigger for automatic enrolment but employees may still join the scheme.

The entitled worker may join the pension scheme but the employer is under no obligation to make a contribution. The non eligible job holder has a bigger incentive if they join as the employer must make contributions similar to eligible workers.

The government has introduced  minimum contribution rates. The starting point is 1% employer and 1% employee contribution until 30th September 2017. These rates gradually increase to a maximum employer contribution of 3% and an employee contribution of 5% from 2018 onwards.

Any childcare business who is struggling to understand the law or would like us to mange their delegated pension provision with NEST should contact us urgently. If  you require childcare auto enrolment, nursery auto enrolment, nanny auto enrolment  or childminder auto enrolment then we can set everything up for you.

At an early stage we decided to operate the government scheme NEST with our integrated payroll software. The pension is managed with low fees and the contributions are diversified into a balanced portfolio for the employee.

To set your pension up successfully all employers must plan ahead. Are you ready?

Childcare funding for three and four year olds and tax-free childcare voucher scheme delayed

The tax free childcare voucher scheme which was set to be launched in September has been delayed until 2017 following a legal challenge from the companies providing the vouchers. Under the system parents would pay into the online account and the government would top up 20% of the costs.

The government election pledge that it would offer 30 hours of free childcare a week to three and four year olds in England from September 2016 is under scrutiny following questions about funding availabilty. This entitlement will only be implemented once a full funding analysis has passed through parliament causing delays and continued monetary  problems with childcare fees.

In London it is not uncommom for a full time nursery fee to cost £15,000 per annum.

In Scotland all three and four year olds are entitled to 600 hours of free childcare per year.

Statistics show that most families need two people bringing home a wage and that the number of stay-at-home mothers is at its lowest level in more than twenty years.

Many families rely on grandparents and friends for support as well as childminders and nursery childcare. It was thought by many that friends were not allowed to offer each other reciprocal childcare without Ofsted approval and whoever was watching the children would have to register as a childminder. Fortunately, this ambiguity no longer exists.

New Client Discount

Did you see our advert in Home Childcarer magazine issue this month. We have supported the childcare sector for over five years and as a thank you we want to invite you to take up one of the 50 first new client discounts.

All you have to do is drop us an email or complete the new client form and we will  contact you about your business requirements and confirm a fixed fee for our services.

We can help you take the stress out of your financial obligations. Receive the service you deserve with a 10% new client discount and join a specialist childcare practice that really represents the childcare sector.

We regularly advertise in the following magazines:- Pacey, Childminding and now Home Childcarer.


Class 2 National Insurance Changes 2015-2016

Class 2 national insurance will no longer be automatic. From 2015-2016 onwards the self-employed will report their liability through their self assessment. Those that report a profit below a new Small Profits Threshold(SPT) will not be liable for class 2 NICs, but they will be given the option to pay it voluntarily to protect their entitlement to contributory benefits. They will also be informed of the potential impact of choosing not to pay voluntary NIC. The SPT will be set equivalent to the class 2 Small Earnings Exception (this is currently set at £5885).