Another reason to sell property before 6 April 2020
If the draft legislation issued for consultation last year is enacted in the next Finance Act there will be important changes to private residence relief for disposals after 5 April 2020.
Firstly, the exemption for the final period of ownership will be reduced from 18 months to 9 months. This applies where a former main residence is disposed of and is intended to give relief where the owner has moved to another main residence until the former residence is sold i.e. “bridging”. Note that for many years this additional allowance was 36 months that led to a tax planning strategy referred to as “second home flipping” which HMRC are seeking to counteract.
The second change will be the abolition of letting relief except for situations where the taxpayer lives with the tenant. This generous relief currently provides an exemption of up to £40,000 per owner where the former main residence is rented out.
As a result of these two proposed changes you might want to consider disposing of a property before 6 April 2020 if you were planning to take advantage of these CGT reliefs.
If you require any assistance or would like to discuss your tax affairs in more detail please contact our Tax Partners, Steve Crompton or Lucy Williams, on the details below: