Changes to private residence relief

If you rent out all or part of your home this may create a Capital Gains Tax (CGT) charge when you sell the property.

Presently, HMRC excludes the last 18 months of your ownership – even if the property is let for this time – when assessing any CGT liability. In a draft of the Finance Bill released last month, HMRC have confirmed that this 18 month period will be reduced to 9 months from April 2020.

The exemption for disabled property owners or those in a care home will continue to be 36 months.

The draft Finance Bill also confirms a change to the letting relief rules.

Letting relief is an extra deduction you can make from any CGT payable as a result of letting your home. You can claim the lowest of the following three amounts:

  1. The same amount that you can claim as private residence relief.
  2. £40,000.
  3. The same amount as the chargeable gain you made from letting your home.

From April 2020, you will only be able to claim this letting relief if you are in shared occupancy with the tenant.

Property owners contemplating the disposal of their home – which is or has been let for any period – may be advised to complete their sale before April 2020. In this way they will benefit from the 18 month exemption and the more flexible lettings relief.

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