Experts Issue Six-Month Warning Regarding Regulations
Property owners who are thinking about selling a home are being urged by specialist private wealth experts to act fast and take advantages of two key tax exemptions before major changes to the regulations come into force.
There are now just six months to go until changes to Private Residence Relief are introduced on April 6th 2020, with the move meaning that more people are likely to have to pay capital gains tax when they sell a home.
Under the plans, the so-called final period exemption is set to be reduced from 18 months to just nine, while the residential lettings exemption will also be changed so it only covers situations when an owner is in shared occupation with a tenant.
With the changes expected to have significant consequences for those planning to sell, specialist lawyers at Irwin Mitchell are calling on anyone considering a sale to act quickly and take advantage of the existing exemptions before it is too late.
Expert Opinion“The impact of these changes is pretty clear – anyone with more than one home who sells a property after April 5th 2020 is likely to have to pay far more tax than if the transaction was completed just a day before.
“There are now just six months to go until this date and, considering the length of time it can take to sell a property, we felt it was important to highlight this issue now so people can act ahead of the changes.
“They may seem to some like small tweaks to the existing system, but we are sure these issues could ultimately have some significant consequences, particularly as from 6 April 2020 capital gains tax on property gains will have to be paid within 30 days of sale.” Liz Beadsley - Chartered Tax Advisor & Manager - Partner
Final Period Exemption
At present, the final 18 months of ownership of a property that has been a main residence at some point qualifies for relief. However, this period is set to be cut to just nine months, although it will remain at 36 months for disabled individuals or those moving into a care home.
Furthermore, if the property was the main residence for just part of the ownership period, only the proportion of the gain for which it was will be exempt.
Liz added: “There are rules around selecting which of two or more residences should be treated as a main property in relation to this issue, so it is important for anyone facing this to seek advice.”
In contrast, the residential lettings exemption can be claimed for a period when the property is let up to a maximum of £40,000 of gain. While at present the standard situation covered by this would be when owners have moved out and let the property, the change would only cover where the owner is in shared occupation with their tenant.
Liz explained: “The letting of the whole property to a tenant won’t qualify for the exemption anymore, which means there could well be major implications for a number of people. Again, it would be absolutely vital for anyone who may be affected to seek specialist advice at the earliest opportunity.”