Submitted by Sestini & Co
| on Wed, 06/19/2019 - 8:37 | In Buy to Let
The 2018 Budget suggested changes
to Principal Private Residence (PPR) relief which affects whether or not
someone is liable for Capital Gains Tax (CGT) on disposal of a property. The
government is also scaling back lettings relief and under the new rules only landlords who live in the
property with their tenants will qualify for this benefit from April 2020.
HMRC have published a consultation
document, which closes on 1 June 2019. After giving its response, the
government will draft legislation in the summer. The central tenet of the new
rules is very unlikely to change – the consultation is around the details of
how this could work in practice.
Under what circumstances does PPR relief apply?
As the government says, “Private Residence Relief (PRR) is designed to keep out of Capital Gains Tax (CGT) those gains or losses that arise when
a person sells or otherwise disposes of a dwelling that has been used as their
only or main residence”.
PPR relief is currently available
for periods of “actual” occupation and those of “deemed” occupation.
Section 222-226 of the Taxation of Chargeable Gains Act 1992 addresses
the capital gains provisions for disposal of a private residence, so when an
individual sells their main residence, they don’t have to pay CGT on any gains
from the sale.
However, the 2018 Budget set out a
number of changes to PPR relief including that the final period exemption be
reduced from the current 18 months to 9 months.
PPR had already been reduced from
36 months to 18 months in April 2014 except for owners who moved into a care
home or were disabled and this exemption is set to stand under the new rules.
From April 2020 the rules on two ancillary reliefs will change and
HMRC is seeking views in the consultation on the details of how this will work
At the moment, the owner doesn’t have to pay CGT on gains made in
the final 18 months of ownership. Because occupation can be sporadic, owners can
accrue relief on multiple properties. From 6 April 2020 the exemption is set to
be reduced to nine months.
- Lettings relief will only be allowed where the
owner remains in “shared occupancy” with the tenant
Lettings relief currently allows landlords to shelter up to
£40,000 of relief (£80,000 for a couple) if you let out a property that is, or
has been, your main residence.
From April 2020, the relief will only be available to those in
shared occupancy with a tenant.
tax is payable on any profit you make from selling an investment property. So,
if you bought a buy-to-let property for £100,000 and sold it for £250,000 you
would have to pay tax on the £150,000 gain.
however, you rent out a property that was once your main home then, when you
sell, you only have to pay tax on the amount it went up in value by (the gain)
since you left.
According to the Residential Landlords Association, one in four
buy-to-let investors intends to sell at least one property within the next 12
months because of these rules.
A new type of property fund, called a real
estate investment trust, that offers better tax breaks is one
If you are a landlord or property owner who feels they may be
affected by the new rules and would like to discuss the tax implications of
selling your property or adding to your property portfolio, give us a call on 01761 241 861 or email us today. We can help you identify tax efficiencies for your own or your
We will be pleased to advise you or to invite you
into our offices in Paulton, near Bristol and Bath, for a consultation.