Budget changes regarding capital gains tax & lettings relief

In the October 2018 budget the Chancellor announced changes which will potentially impact on the capital gains position of landlords (where they are eligible for letting relief) from April 2020.

These provisions are:

1. The final period exemption will reduce from 18 months to 9 months, in other words only the last 9 months of ownership of a residential property will be available as principle private residence relief. This final period of exemption will remain at 3 years for those who move into Care and it also applies for disabled persons.

2. Lettings relief
Lettings relief is the ability to deduct a further sum of money being the lower of:
i) The main residence relief.
ii) The gain attributable to residential letting.
iii) £40K.
This valuable further deduction from the capital gains computation in addition to the principle private residence deduction can be quite significant. To date it applies if the property had been used at any time for the principle private residence. However, this is now withdrawn and only applies to those who are in shared occupancy with a tenant.

Where a rental property is jointly owned and the gain made on sale is eligible for lettings relief, each owner is entitled to a maximum £40,000 relief saving a significant amount of tax.If you own a buy-to-let property which was once your principle private residence, contact us to see how you are affected by this change.