At the last Autumn Budget, the Chancellor announced a change to the Capital Gains Tax regime and reliefs which will affect UK taxpayers selling UK residential property.
The changes, which are due to come into effect from 6 April 2020, will restrict the availability of “Lettings Relief” and “Principal Private Residence (PPR) Relief.” These changes mainly affect taxpayers who have occupied a residential property as their main residence and have also let the property out at some point during the period of ownership.
Lettings relief is a valuable relief that may reduce the Capital Gains Tax (CGT) payable on the sale of a residential property, which was at some point used as your only or main residence, and which has also been let as residential accommodation. At present, taxpayers can claim relief of up to £40,000 each. However, from 6 April 2020, the relief will be reformed so that it is only available in exceptionally limited circumstances.
In addition to the changes to Letting Relief, PPR relief will also be reformed. The Capital Gain relating to any period in which you occupied a residential property as your main home is exempt. Currently PPR is extended to the last 18 months of ownership before a sale regardless of whether you actually occupied the property during that time. From 6 April 2020, the government is proposing to cut this PPR exemption to just 9 months.
These changes can significantly increase the tax payable on the sale of a residential property from 6 April 2020.
Should you wish to discuss these changes and the impact that they will have on your tax exposure, then please feel free to contact us.