Tax Changes to Private Residences in 2020-21
07 November 2019
If you have a property which was once your main residence and you either let it out or have retained it for other reasons, then, from 6 April 2020, HMRC is proposing three significant changes which will potentially increase the capital gains tax paid on the disposal of the property.
These changes are:
Letting relief
Since 1980, letting relief has been an extremely valuable tax break on the sale of a property that had been your main residence at some stage.
For disposals made on or after 6 April 2020, HMRC is looking to limit the availability of letting relief by restricting it to those who share occupation of their house with a tenant. This means that should you move out of the property and let it to a tenant, letting relief will no longer apply.
Final-period exemption
If a property has ever been your main residence, in most cases the last 18 months of ownership qualify for private residence relief and are exempt from tax – even if you live elsewhere.
From 6 April 2020, HMRC proposes to reduce this final period of exemption to nine months.
30-day payment window
Capital gains tax is currently paid when you file your tax return through self-assessment, which is due on 31 January following the end of the tax year in which your property was disposed. This could mean between 10 and 22 months after the date of sale.
From 6 April 2020, anyone making a taxable gain from the sale of UK residential property will have to pay the tax owed within 30 days of the completion date.
Capital Gains Tax Planning
Forward planning can help mitigate the tax burden of legislative changes, even if they cannot be eliminated. Speaking to your Daly Park Accountant about Capital Gains Tax Planning will give you the best opportunity to utilise these opportunities.
To read more click on the link to our article on Capital Gains Tax Planning and to look at examples of a residential disposal both before 6th April 2020 and after these new tax changes apply.
HMRC's website provides more in-depth information on Tax when you sell property. Click on the following link for more details and how to work out your gain/profit on disposal: