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Capital gains 'Letting Relief'� rule change from April...

HMRC Tax Cash

Capital Gains Tax:

Owners of second homes and buy-to-lets that they have previously lived in should be aware that as from April 2020 the tax relief period allowed against capital against tax (CGT) will be reduced.

As it is a present,when you sell a property that has been your main home in the past,the last 18 months of ownership will qualify for tax relief as if youoccupied it, under principal private residence (PPR) relief.

However, and this iscritical if you intend to dispose of a buy-to-let investment, or ifyou are in the process of doing so, as from April 2020 the 18 monthsrelief period will be lost unless you are sharing occupancy of thehome with the tenant(s) under the same roof.

Home owners, whenbuying a new home before selling the old one, can be caught in this '�it means the window for selling to avoid any CGT liability will bejust 9 months come April '� a rather tight selling schedule in aslow housing market, and a huge risk of losses if there is aconsiderable gain.

Given all theupheaval in government over recent months it is perhapsunderstandable that there'�s a whole raft of proposed taxlegislation still literally in draft form, and yet it is all stillslated to come into effect from April, despite that fact it will haveto be rushed through.

With a newConservative government now in place, and a new budget due thisspring, people will no doubt be wondering about the direction BorisJohnson'�s new government will take on matters like these, but it isthought that tax measures already planned are most likely to remain.

The principalprivate residence (PPR) relief is a valuable concession which meansthat ordinarily when a main residence is sold there is no CGT to payon any gain. The letting relief is an extension of this for landlordsand second home owners who previously lived in the property.

The relief currentlyprovides up to �40,000 of exemption (�80,000 for a couple withjoint ownership) for those who let a property that had previouslybeen their main residence. The lettings relief is the lower of thePPR relief amount, the lettings chargeable gain amount, or �40,000

Given the currenteconomic climate these new rules seem harsh, and there will be nophasing in. What'�s more, for those selling after April, an onlinetax return must be made within 30 days and any CGT due paid straightaway.

Furthermore, whichseems harsh for landlords, after April it is proposed that thelettings relief will only apply where the owner is sharing occupancyof the home with the tenant(s) under the same roof.

So no longer is itlikely to be wise to let-out a main home when owners need to move,but when their former residence is proving difficult to sell, unlessthey are willing to share with a tenant or lodger.

It is expected thatthese proposed changes will result in significant increases in CGTpayable on the sale of a properties after 5th April 2020, and the taxwill have to be paid almost immediately, creating cash-flow problemsfor some people.

Capital Gains Tax: Private Residence Relief: changes to the ancillary reliefs

Tax when you sell your home


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