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private residence relief

Finance Bill 2019-20 confirms expected changes to Private Residence Relief and lettings relief

Yesterday (11 July), the Government published the Finance Bill 2019-20, containing a raft of changes to Private Residence Relief and Letting Relief for individuals selling property which is, or once was, their main home. The proposed changes were consulted on earlier in the year and therefore have been expected. They will come into force from 6 April 2020.

Currently, where an individual sells a property which is, or has been, their main residence, the final 18 months of ownership are relieved from Capital Gains Tax regardless whether the property is in fact the main residence or not and regardless of whether the individual actually has another property which is their qualifying main residence. From 6 April 2020, this will fall to the final 9 months of ownership.   This may impact those who move into a new home before selling their previous home as well those who let out a property which was once their home.

The other key change is the significant reduction in the scope of Lettings Relief. Lettings Relief has been available to exempt all or part of the capital gain accruing over a period during which a property which was once the taxpayers main home is then let out. The changes will all but abolish the availability of Lettings Relief, with it only being available in future where the property is under shared occupation between the owner and the tenant. The usual arrangement of simply letting a whole property to a tenant will no longer qualify. The new rule will apply for any sale on or after 6 April 2020 so will change the currently expected tax treatment of future sales.

There are a handful of other changes being made to the rules but these are unlikely to affect large numbers of taxpayers.

The above changes could have  significant impact on the tax payable on a future property disposal and those considering selling an affected property in the near future may want to bring forward the sale to complete before 6 April 2020.   

If you are considering selling a property which is, or once was, you main home, we recommend seeking advice on the tax consequences of doing this.  If you would like to speak to one of our property tax specialists, please contact us.