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Landlords affected by new tax changes

By Tim Woodgates


FROM 6 April 2020 some important changes are being introduced relating to Capital Gains Tax (CGT), Lettings Relief and Principal Private Residence Relief (PPR) which will affect those renting out properties.

From April 2020, Lettings Relief will be restricted so that homeowners can only claim it when they are sharing the property with the tenant. For most landlords, this is unlikely to be the case (other than in a rent a room scenario) and therefore, in effect, Lettings Relief is being abolished for the majority of landlords from 6 April 2020. This relief was particularly valuable in situations where a landlord had previously lived in the property as their main residence and subsequently let it out prior to sale (this relief was potentially worth up to a maximum of £40,000 relief per owner).

At the same time, the availability of Principal Private Residence Relief is being reduced from 18 months to nine months. At the moment, as long as a property has at some point been the owner’s only or main home, the last 18 months of ownership qualifies for PPR relief even where they are not still living in the property. This deemed period of residence relief was intended to allow for practicalities of selling and moving house.

From 6 April 2020, this 18-month exemption will reduce to nine months, meaning that an additional nine months of gain may, in certain circumstances, be subject to capital gains tax.

In addition, UK residents that sell land or property in the UK at a capital gain after 5 April 2020, will need to prepare a formal CGT computation and return this to HMRC within 30 days of the relevant sale. They will also need to pay any tax due in the same period.

The new 30-day reporting requirement applies to the sale of UK residential property by UK residents. A ‘residential property return’ must be completed, filed and the tax paid within 30 days of the date of completion of the property sale. (N.B. If there is no gain to report or the gain is covered by exemptions or losses, you won’t have to complete a property disposal return.)

Where there is a capital gain it is important to remember that this is an additional reporting requirement (i.e. where you complete a Self-Assessment Tax Return the disposal will also need to be reported there).

The reduction in Principal Private Residence Relief is unfortunate and may result in some property sales becoming liable for capital gains tax where the sale has been genuinely delayed beyond the vendor’s control.

However, it is the effective abolishment of lettings relief that is likely to have the most significant impact on anyone with rental properties that have, at one time, been their main residence.

As such, we recommend that anyone affected by the changes seeks professional tax advice to identify the impact that the changes will have.

For further advice, contact Tim Woodgates at Moore Chartered Accountants on 01536 461900 or visit www.moore.co.uk

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