Capital Gains Tax changes set to have an impact on landlords

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In the latest UK200Group blog post Heidi Berry, Commercial Disputes Lawyer at Price Bailey discusses the two upcoming changes to the Capital Gains Tax.

Heidi Berry
Two changes to the Capital Gains Tax (CGT) regime that are due to take effect next year could have significant implications for residential landlords and multiple property owners.

The first is a change to the amount of lettings relief that a property owner can claim when selling a previously rented property. Currently, if a landlord sells a rental property that was at some point their main home, they will receive relief from CGT of up to £40,000 of any gain. If the property was owned jointly, each co-owner is able to receive up to £40,000 relief on their portion of the gain.
This means that a couple may together receive relief on £80,000 of capital gains, which could be worth up to £22,400 for a couple selling a jointly owned rental property.

However, this rule is changing for property sales made on or after April 6 2020; from this date the relief will only be available to landlords if they live in the rental property with the tenant.

This means that many landlords will no longer be entitled to claim the lettings relief when they sell their properties. So if you are considering the sale of a rental property, depending on your circumstances there may be merit in aiming to sell prior to April 5 2020.

The second change relates to the payment terms of any CGT charge incurred on the disposals of second properties.

Under the existing arrangements, if you were to sell or otherwise dispose of a property that doesn’t qualify for Principal Private Residence Relief (ie the CGT relief that applies when selling your main residence) in the current 2019/20 tax year, the CGT charge would be payable by 31 January 2021 as part of your annual self-assessment return; this would give you a payment period of anywhere between 10 and 22 months.

However, the new rules – which again take effect from April 2020 – will mean that all CGT payments will need to be made within 30 days of the sale, gift or disposal of the property being completed.

The changes have been written about in more detail on the Price Bailey blog Are you aware of the new payment terms for Capital Gains Tax on property disposals?, but the key to mitigating the impact of either of these changes is to talk to your advisers and plan any sale or disposals in advance.

This blog was written by Heidi Berry, Commercial Disputes Lawyer at Price Bailey.


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