Updated: Jul 21, 2020
HMRC announced that it will implement a number of capital gains tax (CGT) changes, which will affect landlords from 6th April 2020.
Principal Private Residence relief (PPR)
For the 2019/20 tax year and previous, when a person buys a property, lives in it as their main residence for a period but subsequently rents the property out before selling it, they were entitled to claim Principal Private Residence relief (PPR) for the final 18 months of ownership.
Effective 6th April 2020, this 18 month period will be reduced to nine months. There are some exceptions, for example anyone who is selling because they are moving into a care home, or has a disability, will still be able to claim for the final 36 months that the owned the property.
Landlords could also benefit from Lettings Relief of up to £40,000 when selling a property that was once their main residence – even if they hadn’t lived in it for many years. From 6th April 2020, owners will need to live in the property themselves when they come to sell it. This change effectively removes Letting Relief for the vast majority of landlords when calculating their taxable gain.
Mortgage Interest Relief
In the 2020/21 tax year, landlords will be able to offset only 20% of their mortgage interest payments as this relief is further tapered down from 100% since 2017.
In addition to these changes to reliefs, from 6th April 2020 those selling a residential property must complete a new standalone online return within 30 days together with payment on account of the Capital Gains Tax due. Both must be completed and paid within 30 days of the transaction.
As a result of the changes and with uncertain times ahead due to Covid-19, we are set to see some big changes to the UK housing market.
If you need help calculating your taxable gain on the sale of a property or if you need rental accounts with your tax return, check out our services here. Give us a call to discuss your situation in more detail.
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