Lettings Relief/Principal Private Residence Relief
Second home owners will be hit again following changes announced in the 2018 Budget. There will be changes to Capital Gains Tax reliefs when selling a property that has been rented but which has also been your main residence at some point during the period of ownership.
For sales made after 5 April 2020, the final 18-month exempt period, which was shortened from 36 months in 2014, will halve again to 9 months. This change will affect individuals and families who move out of a property more than 9 months before they sell it, although the relief available for those who have to move out into residential care will remain unchanged.
Also, the lettings relief which is worth up to £40,000 per person, will be scrapped for those who do not occupy the property at the same time as their tenants. Although this relief has appeared very generous in the past, being worth up to £80,000 tax relief for a couple, the changes will completely remove the relief for all except owner occupiers and have a significant impact on Capital Gains Tax liabilities. Further details of how this will work in practice are expected in due course.
We can help
If you are considering selling a property in which you have not lived in for the whole period or ownership, it may be worth seeking advice from your usual MFW office to assess how the change of rules in 2020 may impact on your tax position.